Sell or Process Further Wexpro. Inc., produces several products from processing

Question

Sell or Process Further Wexpro. Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $60,000 per ton. one-fourth of which is allocated to product XI5. Seven thousand units of product X15 are produced from each ton of clypton. The units can either be sold at the split off point for $9 each, or processed further at a total cost of $9,500 and then sold for $12 each. Required: Should product X15 be processed further or sold at the split-off point?

Explanation / Answer

Incremental revenue after split of = 7000 x $3=$21000

Incremental cost =$9500

Incremental profit = $11500

The product sshould be processed further as profit would be higher

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