River Corp. manufactures three products from a common input in a joint processin

Question

River Corp. manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. Each product may be sold at the split-off point or processed further. The additional processing costs and sales value after further processing for each product (on an annual basis) are: Which product or products should be sold at the split-off point, and which product or products should be processed further? You must show your calculations.

Explanation / Answer

Sales Value at split off Cost at split off Profit at split off Further Sales Value Profit after Processing after processing processing Cost Product W 100000 33333 66667 30000 125000 61667 M 75000 25000 50000 20000 100000 55000 B 125000 41667 83333 35000 175000 98333 Total 300000 100000 200000 The product W should be sold at split off and Product M & B should be processed further

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