Attawfik Co. makes the molded metal parts for three model car kits, X, Y & Z fro

Question

Attawfik Co. makes the molded metal parts for three model car kits, X, Y & Z from a joint production process. The joint costs of this process are $350,000. In each case, Attawfik Co. could decide to make the entire kit rather than just the metal parts. Information about the sales values and separable costs for each kit is given below. Determine which kits Attawfik Co. should sell at the split-off point and which kits Attwafik Co. should process further. Kit Final Sales Value Sales Value at Spilt-off Separable costs X 400,000 350,000 40,000 Y 220,000 120,000 140,000 Z 180,000 60,000 100,000

Explanation / Answer

Determine which kits Attawfik Co. should sell at the split-off point and which kits Attwafik Co. should process further

so X, Z shoule be sold after further processing and Y should at split off point

X Y Z Sale value after further processing 400000 220000 180000 Sale value at split off point (350000) (120000) (60000) Incremental revenue 50000 100000 120000 Less: Seprable cost (40000) (140000) (100000) Incremental profit 10000 (40000) 20000

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