A company produces two products in a joint process, Z8 and W9. The cost of produ
ID: 2538019 • Letter: A
Question
A company produces two products in a joint process, Z8 and W9. The cost of producing Z8 and W9 is $3881 per batch. Additional information relating to the production of products Z8 and W9 is given below:
Z8
W9
Number of units
600
340
Selling price per unit at the split-off point
$8.00
$13.10
Product W9 can be processed further into product W10 at a cost of $940. 340 units of W9 will produce 203 units of W10, which can then be sold for $24.17 per unit.
What is the incremental benefit of processing further?
Z8
W9
Number of units
600
340
Selling price per unit at the split-off point
$8.00
$13.10
Explanation / Answer
Calculate incremental benefit of processing further :
so incremental benefit of further processing is ($487.49)
Revenue after further processing (203*24.17) 4906.51 Revenue at split off point (13.10*340) 4454 Incremental revenue 452.51 Incremental cost (940) Incremental benefit of further processing (487.49)Related Questions
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