4. Kirk Minerals processes three separate products from a common material extrac

Question

4. Kirk Minerals processes three separate products from a common material extracted from mines incurring joint costs of $180,000. Eaach of the three products can be sold at the split-off point or can be processed further. The following information is available Sales Value if Product Sales Value atAllocated Split-Off Point $210,000 S300,000 Costs to Process Further $110,000 S85,000 $250 Joint Costs S40,000 S60,000 S80 Processed Further S300,00 S400,000 $800 Uhura Sulu $455 Instructions Should each of the joint products be sold at the split-off point or processed further? Why?

Explanation / Answer

Calcuation Spock Uhura Sulu Sales Value at split-off A 210,000 300,000 455,000 Sales value After further processing B 300,000 400,000 800,000 Incremental Revenue C= B-A 90,000 100,000 345,000 Further Processing costs D 110,000 85,000 250,000 Incremental profit/Loss E=C-D -20,000 15,000 95,000 Decision Sold at Split off point Should be processed further Should be processed further Why? Incremental Revenue is less than further porcess costs Incremental Revenue is more than further porcess costs Incremental Revenue is more than further porcess costs

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