Question

Product X and Y are made from a common input. Joint processing costs up to the split-off point total $48,900 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	$	19,100		$	29,800		$	48,900
Sales value at split-off point	$	26,000		$	37,950		$	63,950
Costs of further processing	$	23,600		$	17,900		$	41,500
Sales value after further processing	$	49,400		$	57,100		$	106,500

Required:

a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.)

b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point? (Negative amount should be indicated by a minus sign.)

A. financial advantage or disadvantage...input amount

B. financial advantage or disadvantage...input amount

Answer 1

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Part a and b
		Product X	Product Y
Sales value after further processing	a	$     49,400	$       57,100
Sales value at split-off point	b	$     26,000	$       37,950
Incremental Sale after split-off point	a-b=c	$     23,400	$       19,150
Costs of further processing	d	$     23,600	$       17,900
Incremental Income/(Loss)	c-d	$          -200	$         1,250
Financial Advantage/(Disadvantage)		$          -200	$         1,250