Question
In: Accounting
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 agoRelated Solutions
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