In: Accounting
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
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