Question

19) Woodridge Corporation has a joint process that produces three products: P, G and A. Each product may be sold at split-off or processed further and then sold. Joint-processing costs for a year amount to $25,000. The production level for each product is 1,000 units. Other data follows:

                                 Sales Value                 Separable Processing              Sales Value

Product                    at Split-Off                   Costs after Split-Off               at Completion

P                                    $12                                     $9                                     $21

G                                     10                                       4                                      17

A                                     15                                       6                                      19

Assume Woodridge Corporation processes the joint products beyond the split-off point that will maximize net income. Woodridge Corporation's net income is ________.

A) $12,000

B) $15,000 this is the correct answer, please explain why

C) $17,000

D) $25,000

Answer 1

		P	G	A	Total
a	Sales Price	$                 21	$                 17	$                 19
b	Sales units	1000	1000	1000
c	Sales Revenue	$         21,000	$         17,000	$         19,000
d	Unit Costs after Split-Off	$                    9	$                    4	$                    6
e	total after split cost (b*d)	$           9,000	$           4,000	$           6,000
f	Net Realizable value (c-e)	$         12,000	$         13,000	$         13,000
g	Sales price at slpit of point	$                 12	$                 10	$                 15
h	Sale value at split of point	$         12,000	$         10,000	$         15,000
i	Sales to be considered (higher of f or h)	$         12,000	$         13,000	$         15,000	$         40,000
j	joint cost				$         25,000
k	net income (i-k)				$         15,000
Note: See carefully how the calculations have been done . Let me know your queries