Iaci Company makes two products from a common input. Joint processing costs up t
ID: 2570980 • Letter: I
Question
Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $48,500 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 Product Y Total Allocated joint processing costs $ 18,700 $ 29,800 $ 48,500 Sales value at split-off point $ 25,800 $ 37,750 $ 63,550 Costs of further processing $ 23,200 $ 17,500 $ 40,700 Sales value after further processing $ 48,600 $ 56,300 $ 104,900 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.) b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? (Input the amount as a positive value.) c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point? d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point? I have every number combination for the minimum amount to accept and looked through all examples but they continue to be wrong. Please help with c and d. It is not the Allocated joint cost, not incremental? I don't know please help!!
Explanation / Answer
Product X Product Y Sales value after further processing 48600 56300 Costs of further processing 23200 17500 Benefit of further processing 25400 38800 c Minimum amount the company should accept for Product X = 25400 d Minimum amount the company should accept for Product Y = 38800
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