Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare

Question

Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $53,000 per ton, one-fourth of which is allocated to product X15. Eight thousand one hundred units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $17 each, or processed further at a total cost of $7,100 and then sold for $23 each.

Required:

1. What is the financial advantage (disadvantage) of further processing product X15?

2. Should product X15 be processed further or sold at the split-off point?

Explanation / Answer

Sales value after further processing 186300 =8100*23 Sales value at the split-off point 137700 =8100*17 Incremental revenue from further processing 48600 Cost of further processing 7100 Profit from further processing 41500 Financial advantage $41500 2 Product X15 be processed further

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