17. Two products, Ql and VH, emerge from a joint process. Product Ql has been al
ID: 2586073 • Letter: 1
Question
17. Two products, Ql and VH, emerge from a joint process. Product Ql has been allocated $9,600 of the total joint costs of $12,000. A total of 9,000 units of product Ql are produced from the joint process further for an additional total cost of $54,000 and then sold for $18 per unit. If product Ql is processed further and sold, what would be the financial advantage (disadvantage) for the company? . Product Ql can be sold at the split-off point for $13 per unit, or it can be processed A) ($18,600) B) $108,000 C) $600 ($9,000) 18. The Chemical Corporation manufactures three chemicals (TX14, NJ35, and KS63) from a joint process. The three chemicals are in industrial grade form at the split-off point. They can either be sold at that point or processed further into premium grade. Costs related to each batch of this chemical procéss is as follows: TX14 NJ35 KS63 Sales value at split-off point. . $16,000 $12,000 $5,000 Allocated joint costs $6,000 Sales value after further processing $20,000 $18,000 $9,000 $5,000 $3,000 $2,000 Cost of further processing For which product(s) above would it be more profitable for the company to sell at the split-off point rather than process further A) TX14 only B) KS63 only C) TX14 and KS63 only D) NJ35 and KS63 only 19. The most recent monthly income statement for The Stores is given below Sales. Variable expenses. Contribution margin TotalStore A Store B $1,000,000 $400,000 $600,000 580,000 160,000 420,000 420,000 240,000 180,000 Traceable fixed expenses Store segment margin. Common fixed expenses.... Net operating incom.e.70.000 120,000 140,000 (20,000) -50.000-20.000-30.000 $120.000 (50.000) Due to its poor performance, consideration is being given to closing Store B. If Store B is closed, one- fourth of its traceable fixed expenses will continue unchanged. Closing Store B would also result in a 10% decrease in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars. Show the computation of the monthly financial advantage (disadvantage) of closing Store B:Explanation / Answer
18 Answer :- Joint product are two or more product manufacture from the same input or same process (i.e joint process). Prior to split off point all cost are incurred are sunk cost and as such have no bearing on any future decisions. In decision making of joint product weather to sell at split off point or further process is important for a business to maximize its profit. A product to be sold off at split off point if there is not any incremental profit from processing the product further.
Lets calculate the incremental profit
From the above it can be concluded that it is better to sell off TX14 (A) only at split off point to maximize profit.
19. Computation of the monthly financial advantage (disadvantage) of closing store B
TX14 NJ35 KS63 Selling price for further processing 20000 18000 9000 selling price at split off point 16000 12000 5000 Incremental revenue 4000 6000 4000 Incremental cost for further processing 5000 3000 2000 Incremental profit /Loss (1000) 3000 2000Related Questions
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