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Iaci Company makes two products from a common input. Joint processing costs up to the split-off...

Iaci Company makes two products 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 the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?(Input the amount as a positive value.)


      

b.

What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? (Input the amount as a positive value.)


      

c.

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?


please show the process on how you find the answered. Thank you

Solutions

Expert Solution

Answer a

Net monetary advantage (disadvantage) of processing Product X beyond the split-off point

Profit = Sales value after further processing -  Sales value at split-off point - Costs of further processing.

= $49,400 - $26,000 - $23,600 = ($200)

Answer b

Net monetary advantage (disadvantage) of processing Product Y beyond the split-off point

Profit = Sales value after further processing -  Sales value at split-off point - Costs of further processing.

= $57,100 - $37,950 - $17,900 =$1,250

Answer c

Minimum amount the company should accept for Product X if it is to be sold at the split-off point

= Sales value at split-off point + Profit processing Product X beyond the split-off point

= $26,000 + ($200) = $25,800

Answer d

Minimum amount the company should accept for Product Y if it is to be sold at the split-off point

= Sales value at split-off point + Profit processing Product Y beyond the split-off point

= $37,950 + $1,250 = $39,200

ekkarill92 answered 3 years ago
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