Dynamic Company manufactures two joint products. At the split-off point, they ha

Question

Dynamic Company manufactures two joint products. At the split-off point, they have sales values of:

Dazzle $18 per unit

Sparkle $12 per unit

After further processing, the company can sell them for $36 and $16, respectively. Dazzle costs $12 per unit to process further and Sparkle costs $8 to process further. Should further processing be done on either or both of these products?

Process both products further

Process Dazzle further, sell Sparkle as is

Sell both products as is

Sell Dazzle as is, process Sparkle further

Process both products further

Process Dazzle further, sell Sparkle as is

Sell both products as is

Sell Dazzle as is, process Sparkle further

Explanation / Answer

answer:

Process Dazzle further" sell sparkle as is

since dazzle generates higher net benefit after further processing(24) then benefit at split off point(18)

therefore it should be further processed.

sparkle generates lower benefit after further processing(8)as compare to benefit at split off point(12),therefore it should not be further processed.

dazzle sparkle sale value 36 16 less:additional cost 12 8 net benefit 24 8

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