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

bsen Company makes two products from a common input. Joint processing costs up to the split-off point total $51,500 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	$	30,900	$	20,600	$	51,500
Sales value at split-off point	$	30,000	$	20,000	$	50,000
Costs of further processing	$	23,200	$	17,500	$	40,700
Sales value after further processing	$	48,600	$	56,300	$	104,900

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?

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?

Solutions

Expert Solution

a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?

Sale value ( after further processing)	48600
Sale value at split of point	30000
Incremental Revenue	18600
(-) Further processing cost	23200
Financial Disadvantage	- 4600

b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?

Sale value after split	56300
Sale value at split of point	20000
Incremental revenue	36300
(-) Further processing cost	17500
Financial advantage	18800

c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?

Minimum price (amount) at split = Final sale value - Further processing cost. It means that incremental revenue must at least pay for additional or further processing costs.

= 48600 - 23200 = 25400 ............. final answer

d . Minimum price = 56300 - 17500 = 38800 ...........final answer

ekkarill92 answered 1 year ago

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