bsen Company makes two products from a common input. Joint processing costs up t
ID: 2522315 • Letter: B
Question
bsen Company makes two products from a common input. Joint processing costs up to the split-off point total $51,500 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Required:
a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.)
b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?
Product X Product Y Total Allocated joint processing costs $ 30,900 $ 20,600 $ 51,500 Sales value at split-off point $ 30,000 $ 20,000 $ 50,000 Costs of further processing $ 23,200 $ 17,500 $ 40,700 Sales value after further processing $ 48,600 $ 56,300 $ 104,900Explanation / Answer
a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?
b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
Minimum price (amount) at split = Final sale value - Further processing cost. It means that incremental revenue must at least pay for additional or further processing costs.
= 48600 - 23200 = 25400 ............. final answer
d . Minimum price = 56300 - 17500 = 38800 ...........final answer
Sale value ( after further processing) 48600 Sale value at split of point 30000 Incremental Revenue 18600 (-) Further processing cost 23200 Financial Disadvantage - 4600Related Questions
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