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 $71,000 per ton, one-fourth of which is allocated to product X15. Six thousand five hundred units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $17 each, or processed further at a total cost of $8,800 and then sold for $22 each.

Required:

1. What is the financial advantage (disadvantage) of further processing product X15?

2. Should product X15 be processed further or sold at the split-off point?

Explanation / Answer

Statement showing computations Particulars product X15 Selling price after further processing                       22.00 Selling price at split off point                       17.00 Incremental revenue per pound or gallon                         5.00 No of units of product                 6,500.00 Total Incremental Revenue              32,500.00 Total Incremental Processing costs                 8,800.00 Total Incremental profit or loss              23,700.00 1) financial advantage of further processing product X15              23,700.00 2) Product X15 should be further processed

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