23. Center Company currently produces three products from a joint process. The j

Question

23. Center Company currently produces three products from a joint process. The joint process has total costs of $512,000 per month. All three products, A, B & C, are immediately saleable as they come out of the joint process. Alternatively any of the products could continue on with additional processing and be sold as a more complete product. The following information is available Immediate Sales Later Sales Price 16 $ 24 $ 31 Unit Cost of Further Processing $ 2.00 $2.50 $3.00 Units A 4,400Price $ 21 $ 24 15 B 17,900 C 10,400 a-1. Should Product A be sold immediately or sold after processing further? Sell Now O Sell Later a-2. How much will the decision affect profit? Decision affects profit by

Explanation / Answer

A B C Sales price after processing 16 24 31 Sales price as is 15 21 24 Incremental sales revenue 1 3 7 Additional costs 2 2.5 3 Incremental profit(loss) -1 0.5 4 Units 4400 17900 10400 Total Incremental profit(loss) -4400 8950 41600 a-1 Sell now a-2 Decision affects profit by $4400 b-1 Sell later b-2 Decision affects profit by $8950 c-1 Sell later c-2 Decision affects profit by $41600

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