Upscale Dishwear manufactures two products, salad plates and platters, from a jo

Question

Upscale Dishwear manufactures two products, salad plates and platters, from a joint process. Salad plates are allocated $7,500 of the total joint costs of $25,000. There are 3,000 salad plates produced and 3,000 platters produced each year. Salad plates can be sold at the split-off point for $12 per unit, or they can be hand painted for additional processing costs of $8,400 and sold for $16 for each deluxe salad plate. If the salad plates are processed further and made into deluxe plates, the effect on operating income would be:

Explanation / Answer

If the salad plates are processed further and made into deluxe plates, the operating income will increase by $ ( 32,100 - 28,500) = $ 3,600

Sell at split-off Process further Sales revenue $ 36,000 $ 48,000 Allocated joint costs $ 7,500 $ 7,500 Additional processing costs $ 8,400 Contribution margin $ 28,500 $ 32,100

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