Question

WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows:

	Product X		Product Y		Product Z
Units produced		1,900		2,400		3,400
Per unit sales value at split-off	$	14.00	$	18.00	$	19.00
Added processing costs per unit	$	4.00	$	6.00	$	6.00
Per unit sales value if processed further	$	23.00	$	23.00	$	28.00

The cost of the joint raw material input is $82,000. Which of the products should be processed beyond the split-off point?

	Product X	Product Y	Product Z
A)	yes	yes	no
B)	yes	no	yes
C)	no	yes	no
D)	no	yes	yes

Multiple Choice

Answer 1

Calculation of total sales value at split off :
Particulars		Product X	Product Y	Product Z	Total
Units produced (a)		1900	2400	3400	7700
Per unit sales value at split off (b)		14	18	19
Total sales value at split off		26600	43200	64600	134400
Weights		0.197917	0.321429	0.480655
Joint costs apportionment		16229	26357	39414	82000
(Apportioned on the basis of sales value at split off point )
Statement showing product wise total profit after further processing :
Particulars		Product X	Product Y	Product Z
Units produced (a)		1900	2400	3400
Selling price after further processing (b)		23	23	28
Sales value afterfurther processing © = (a)*(b)		43700	55200	95200
Joint costs (d)		16229	26357	39414
Further processing costs (.e)		7600	14400	20400
Total costs (f) =(d)+(.e)		23829	40757	59814
Profit / (loss) (b)-(f)		19871	14443	35386
Computation of incremental sales revenue
Total sales value at split off		26600	43200	64600
Sales value afterfurther processing		43700	55200	95200
Incremental sales		17100	12000	30600
Further processing costs		7600	14400	20400
Decision
Product X and Product z should be further processed beacause the incremental sales revenue after further processing is more than further process cost incurred.
Product y should be sold at split off point because the incremental sales revenue generated after further processing is higher than further processing costs
Option (B) is correct.
Particulars		Product X	Product Y	Product Z
Should be processed beyond split off point		Yes	No	Yes