Solex Company manufactures three products from a common input in a joint process
ID: 2350945 • Letter: S
Question
Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $94,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $54,000; product Y, $93,000; and product Z, $61,000.Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:
Product Additional Processing Costs Sales Value after Further Processing
X $ 37,000 $ 81,000
Y $ 39,000 $ 160,000
Z $ 12,000 $ 77,000
Required:
a.
Compute the incremental profit (loss) for each product. (Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)
Product X Product Y Product Z
Incremental profit (loss) $ $ $
b.
Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
Product X
Product Y
Product Z
c.
Which product or products should be processed further? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
Product X
Product Y
Product Z
Explanation / Answer
Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $94,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $54,000; product Y, $93,000; and product Z, $61,000.
Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:
Product Additional Processing Costs Sales Value after Further Processing
X $ 37,000 $ 81,000
Y $ 39,000 $ 160,000
Z $ 12,000 $ 77,000
Required:
a.
Compute the incremental profit (loss) for each product. (Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)
Product x
y
z
Sales value after further processing
84000
156000
77000
Sales value at splitting
54000
90000
61000
Incremental
30000
66000
16000
Cost of further processing
38000
36000
11000
Incremental profit
8000
30000
5000
Product X------Incremental profit=-8000
Product Y-Incremental profit= 30000
Product Z ------------Incremental profit=5000
Incremental profit (loss) $ $ $
b.
Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
Product X
Product Y
Product Z
c.
Which product or products should be processed further? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
Product X
Product Y
Product Z
Product x
y
z
Sales value after further processing
84000
156000
77000
Sales value at splitting
54000
90000
61000
Incremental
30000
66000
16000
Cost of further processing
38000
36000
11000
Incremental profit
8000
30000
5000
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