A company manufactures three products using the same production process. The cos

Question

A company manufactures three products using the same production process. The costs incurred up to the split-off point are $209,100. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follows.

(b1)

Determine the incremental profit (loss) of each product(s). (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(b2)

Which product(s) should be processed further and which should be sold at the split-off point?

Product Number of
Units Produced Selling Price
at Split-Off Selling Price
after Processing Additional
Processing Costs D 4,580 $10.27 $15.45 $17,704 E 6,020 11.38 16.38 22,220 F 2,380 19.90 22.89 10,576

Explanation / Answer

Product D cost=$209,100*$47,037/$162,906

Product No of products Selling price at split off Total Sales Cost up to Split off based on sale value Profit/(Loss) at split off D 4580             10.27          47,037                       60,374     -13,338 E 6020             11.38          68,508                       87,934     -19,426 F 2380             19.90          47,362                       60,792     -13,430      162,906                   209,100     -46,194

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