2 Gary Corporation produces products X, Y, and Z from a single raw material inpu

Question

2 Gary Corporation produces products X, Y, and Z from a single raw material input. Budgeted data for the next month is as follows: Product Y 2,300 $ 19 Product Z 3,300 $ 18 Product X 1,800 $ 16 Units produced Per unit sales value at split-off Added processing costs per unit Per unit sales value if processed further $ 20 $ 20 $ 25 If the cost of raw material input is $71,000, which of the products should be processed beyond the split-off point? A) B) C) D) Product X yes yes no no ProductY yes no yes Product Z no yes no yes O Option A O Option D Option C O Option B

Explanation / Answer

Differential analysis :

So answer is d) Option B

Product X Product Y Product Z Sale value after further processing 20 20 25 Sale value at split off point 16 19 18 Incremental sale value 4 1 7 Incremental cost 3 5 5 Incremental profit (loss) 1 -4 2 Analysis Yes No Yes

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