WP Corporation produces products X, Y, and Z from a single raw material input in
ID: 2410255 • Letter: W
Question
WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows:
The cost of the joint raw material input is $82,000. Which of the products should be processed beyond the split-off point?
Multiple Choice
Product X Product Y Product Z Units produced 1,900 2,400 3,400 Per unit sales value at split-off $ 14.00 $ 18.00 $ 19.00 Added processing costs per unit $ 4.00 $ 6.00 $ 6.00 Per unit sales value if processed further $ 23.00 $ 23.00 $ 28.00Explanation / Answer
Calculation of total sales value at split off : Particulars Product X Product Y Product Z Total Units produced (a) 1900 2400 3400 7700 Per unit sales value at split off (b) 14 18 19 Total sales value at split off 26600 43200 64600 134400 Weights 0.197917 0.321429 0.480655 Joint costs apportionment 16229 26357 39414 82000 (Apportioned on the basis of sales value at split off point ) Statement showing product wise total profit after further processing : Particulars Product X Product Y Product Z Units produced (a) 1900 2400 3400 Selling price after further processing (b) 23 23 28 Sales value afterfurther processing © = (a)*(b) 43700 55200 95200 Joint costs (d) 16229 26357 39414 Further processing costs (.e) 7600 14400 20400 Total costs (f) =(d)+(.e) 23829 40757 59814 Profit / (loss) (b)-(f) 19871 14443 35386 Computation of incremental sales revenue Total sales value at split off 26600 43200 64600 Sales value afterfurther processing 43700 55200 95200 Incremental sales 17100 12000 30600 Further processing costs 7600 14400 20400 Decision Product X and Product z should be further processed beacause the incremental sales revenue after further processing is more than further process cost incurred. Product y should be sold at split off point because the incremental sales revenue generated after further processing is higher than further processing costs Option (B) is correct. Particulars Product X Product Y Product Z Should be processed beyond split off point Yes No Yes
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