Wright Company produces products I, J, and K from a single raw material input. B
ID: 2486548 • Letter: W
Question
Wright Company produces products I, J, and K from a single raw material input. Budgeted data for the next month follows: If the cost of the raw material input is dollar 78,000, which of the products should be processed beyond the split-off point? Option A Option B Option C Option D Two products, IF and RI, emerge from a joint process. Product IF has been allocated dollar 25,300 of the total joint costs of dollar 46,000. A total of 2,000 units of product IF are produced from the joint process. Product IF can be sold at the split-off point for dollar 11 per unit, or it can be processed further for a additional total cost of dollar 10,000 and then sold for dollar 13 per unit.Explanation / Answer
11./
JOINT COST PER UNIT ($78000 / 6500) = $12 PER UNIT
ANSWER OPTION B
12./
PROFIT/(LOSS) AT SPLIT OFF POINT
TOTAL SALES REVENUE AT SPLIT OFF POINT (2000 * $11) = $22000
TOTAL JOINT COST ALLOCATED = ($25300)
LOSS ON SALE AT SPLIT OFF POINT = ($3300)
PROFIT/(LOSS) AFTER FURTHER PROCESSING
TOTAL SALES REVENUE AFTER FURTHER PROCESSING (2000 * $13) = $26000
TOTAL JOINT COST ALLOCATED = ($25300)
TOTAL FURTHER PROCESSING COST = ($10000)
LOSS ON SALE AFTER FURTHER PROCESSING = ($9300)
EFFECT ON OVERALL PROFIT (-$9300 + $3300) = ($6000)
DECEREASE IN PROFIT $6000
ANSWER OPTION B
13./
ONLY MATERIAL COST ARE RELEVENT BECAUSE THE PROCESSSING COST IS SAME FOR BOTH THE ALTERNATIVES.
ANSWER OPTION C
DESCRIPTION PRODUCT 1 PRODUCT 2 PRODUCT 3 SELLING PRICE AT SPLIT OFF $10 $12 $15 JOINT COST $12 $12 $12 PROFIT OR (LOSS) ($2) $0 $3 SELLING PRICE AFTER FURTHER PROCESSING $15 $15 $20 TOTAL COST AFTER FURTHER PROCESSING $14 $16 $16 PROFIT (LOSS) $1 ($1) $4 PROCESS BEYOND SPLIT OFF YES NO YESRelated Questions
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