Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare

Question

Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $31,000 per ton, one-fourth of which is allocated to product X15. 7,000 units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $14.00 each, or processed further at a total cost of $11,000 and then sold for $18.67 each.

Should be processed further.

Should be sold at the split off point.

Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $31,000 per ton, one-fourth of which is allocated to product X15. 7,000 units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $14.00 each, or processed further at a total cost of $11,000 and then sold for $18.67 each.

Explanation / Answer

1 ton produces 7000 units OF x15 Material & Processing cost $31,000 Unit per cost 4.43 Spilt off point revenue per unit $ 14 Profit per unit $9.57 If further processed than we have to take incremental revenue and incremental cost into consideration Incremental Revenue(18.67-14) 4.67 Incremental Cost $11,000 Incremental Cost per unit $1.57 Incremental Profit per unit $3.10 So it can be further processed as there is incremental profit So in total we can have a profit 9.57+3.1 12.67$

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