3. (20 pts) The Edgerton Co. Produces products A, B, and C from a joint process.

Question

3. (20 pts) The Edgerton Co. Produces products A, B, and C from a joint process. The joint costs for 2013 were $72,000. All three products can be processed further and the pertinent information follows Item Units Sales Value Sales Value if Added Cost to Produced 6,000 4,000 At Split o Processed further Process Further $25,000 41,000 24,000 $42,000 45,000 32,000 $9,000 7,000 10,000 2,000 a) To maximize profits, which product(s) should be processed further? b) IfC is to be processed further, what should its final price be to break-even?

Explanation / Answer

ANswer to A

Answer to B

We need $24000 to break even, currently if we process then we are receiving $22000.therefore we need additional $2000 i.e. if sold at $34000 after processing then there will be break even

Item Sale Value at Split off(A) Sale value if processed (B) cost to process (C ) Cash Flow if processed (B-C) Beneficial A 25000 42000 9000 33000 Process Further B 41000 45000 7000 38000 Sale at Split off C 24000 32000 10000 22000 Sale at Split off

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