XYZ Corporation makes two products from a common input. Joint processing costs u

Question

XYZ Corporation makes two products from a common input. Joint processing costs up to the split-off point total $33,600 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Allocated joint processing costs Product X: $19,600 Product Y: $14,000 Sales value at split-off point Product X: $28,000 Product Y: $20,000 Costs of further processing Product X: $22,400 Product Y: $15,700 Sales value after further processing Product X: $53,500 Product Y: $33,500 Required: a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point? b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?

Explanation / Answer

Hi, Please find the answers as follows: Product X: Sales value after further processing 53500 Costs of further processing 22400 Benefit of further processing (53500-22400) 31100 Less: Sales value at split-off point 28000 Net advantage (disadvantage) (31100-28000) 3100 Net Advantage is 3100 Product Y Sales value after further processing 33500 Costs of further processing 15700 Benefit of further processing (33500 - 15700) 17800 Less: Sales value at split-off point 20000 Net advantage (disadvantage) (17800-20000) (2200) Net Disadvantage is 3100 Thanks, Aman

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