In a joint processing operation, Nolen Company manufactures three grades of suga

Question

In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane. Joint processing costs up to the split-off point total $90,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: raw sugar, $45,000; brown sugar, $49,500; and white sugar, $53,250.

     Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Which product or products should be sold at the split-off point? (Select all that apply.)

Which product or products should be processed further? (Select all that apply.)

In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane. Joint processing costs up to the split-off point total $90,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: raw sugar, $45,000; brown sugar, $49,500; and white sugar, $53,250.

     Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Explanation / Answer

a Raw sugar Brown sugar White sugar Selling price after further processing 90000 84250 104500 Selling price at the split-off point 45000 49500 53250 Total incremental revenue 45000 34750 51250 Total incremental processing costs 47970 32000 32350 Total incremental profit or loss -2970 2750 18900 b Product raw sugar should be sold at the split-off point c Product Brown and white sugar should be processed further

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