Sell at Split-Off or Process Further Bozo Inc. manufactures two products from a

Question

Sell at Split-Off or Process Further Bozo Inc. manufactures two products from a joint production process. The joint process costs $110,000 and yields 6,000 pounds of LTE compound and 14,000 pounds of HS compound. LTE can be sold at split-off for $55 per pound. HS can be sold at split-off for $10 per pound. A buyer of HS asked Bozo to process HS further into CS compound. If HS were processed further, it would cost $51,000 to turn 14,000 pounds of HS into 4,000 pounds of CS. The CS would sell for $59 per pound. Required: What is the contribution to income from selling the 14,000 pounds of HS at split-off? 62,766X 1. 2. Conceptual Connection: What is the contribution to income from processing the 14,000 pounds of HS into 4,000 pounds of CS? 107,766 X Should Bozo continue to sell the HS at split-off or process it further into CS? Process it further into CS Feedback Check My Work 1.Calculate revenue of HS when sold at split-off for $11. 2. Calculate revenue to process further. Multiply sales price by pounds of CS. Subtract processing cost from revenue for contribution margin. Learning Objective 2

Explanation / Answer

1 Contribution to income from selling HS=14000*10=$140000 2 Contribution to income=(4000*59)-51000= $185000 Process it further

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