Larsen Company makes two products from a common input Joint processing costs up
ID: 2501733 • Letter: L
Question
Larsen Company makes two products from a common input Joint processing costs up to the split-off point total $46,700 a year. The company allocates these costs to the joint products on the basis of their total sales values at the spilt-off point. Each product may be sold at the split-off point or processed further. Data conceming these products appear below. What is the net monetary advantage of processing product x beyond the split-off point? What is the net monetary advantage of processing product y beyond the split-of point?Explanation / Answer
a. Cost of further processing = $21500
Incremental sales value = $52600-33600
= 19000
Net Disadvantage = 21500-19000 = 2500
b.Cost of further processing = $21000
Incremental sales value = $60300-33600
= 26700
Net Advantage = 26700-21000 = 5700
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