laci Company makes two products from a common input. Joint processing costs up t

Question

laci Company makes two products from a common input. Joint processing costs up to the split-off point total $49,700 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: 19.300 30400 4 700 24050 3 050 62,00 Sales value at Sales value ater rther processing 47.000 5 57,500 104,500 Required: What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point? (Input the amount as a positive value.) What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? (Input the amount as a positive value.) 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?

Explanation / Answer

a Product X Final sales value after further processing 47000 Less sales value at split-off point 24050 Incremental revenue from further processing 22950 Less cost of further processing. 23800 Profit (loss) from further processing -850 Net disadvantage = $850 b Product Y Final sales value after further processing 57500 Less sales value at split-off point 38050 Incremental revenue from further processing 19450 Less cost of further processing. 18100 Profit (loss) from further processing 1350 Net advantage = $1350 c Minimum acceptable amount = 47000-23800= 23200 d Minimum acceptable amount = 57500-18100= 39400

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