Served Inc manufactures twe products, salad year Salad plat and made into deluxe

Question

Served Inc manufactures twe products, salad year Salad plat and made into deluxe plates, the eflect on operating income would be plates and platters, from a joint process Salad plates are allocated $7,700 of the total joint costs of $27,000 There are 3,000 salad plates produced and 3,000 pluters produced each ocessing costs of $8.000 and sold for $21.00 for each dekuxe salad plate i the salad plates are precessed lather can be sold at the split-off point for $12.00 per unit, or they can be hand painted for addtional p O A. $36.000 net decrease in operating income O B. $36.000 net increase in operating income O C. $18,200 net increase in operating income O D. $18,200 net decrease in operating income.

Explanation / Answer

Solution:

Operating income of salad plate at split of point = Sales - Allocated joint cost

= 3000*$12 - $7,700 = $28,300

Opearating income of deluxed salad plate, if further processed = Sales - Allocated joint cost - further processing cost

= 3000*$21 - $7,700 - $8,800 = $46,500

Net increase in net operating income if salad plate is further processed = $46,500 - $28,300 = $18,200

Hence option C is correct.

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