laukea Company makes two products from a common input. Joint processing costs up
ID: 2544841 • Letter: L
Question
laukea Company makes two products from a common input. Joint processing costs up to the split-off point total $53,700 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 Product X ProductY Total Allocated joint processing costs Sales value at split-off point Costs of further processing Sales value after further processing $20,400 $ 33,300 $ 53,700 $24,700 $ 38,600 63,300 $24,900 $19,200 $ 44,100 $49,200 $59,700 S 108,900 Required a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point? (Input the amount as a positive value. Omit the "$" sign in your response.) Net (Click to select) b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? (Input the amount as a positive value. Omit the "$" sign in your response.) Net (Click to select) c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point? (Omit the "$" sign in your response.) Minimum acceptable amount d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point? (Omit the "$" sign in your response.) Minimum acceptable amountExplanation / Answer
Answers
Profit if Product X is sold after further processing:
Sale Value = $49200
Total cost = 20400 + 24900 = $45300
Profit = 49200 – 45300 = $3900
Profit if Product X is sold at split off point:
Sale Value = $24700
Total cost = $20400
Profit = 24700 – 20400 = $4300
Hence, the company will be at NET Monetary DISADVANTAGE of $400 if Product X is processed beyond split off point. [4300 – 3900]
Profit if Product Y is sold after further processing:
Sale Value = $59700
Total cost = 33300 + 19200 = $52500
Profit = 59700 – 52500 = $7200
Profit if Product X is sold at split off point:
Sale Value = $38600
Total cost = $33300
Profit = 38600 – 33300 = $5300
Hence, the company will be at NET Monetary ADVANTAGE of $1900 if Product Y is processed beyond split off point. [7200 – 5300 ]
The minimum amount the company should accept for Product X if it is to be sold at split off point is $20400, which is equal to Allocated joint processing cost.
The minimum amount the company should accept for Product Y if it is to be sold at split off point is $33300, which is equal to Allocated joint processing cost.
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