Question

2.

In industries that process joint products, the costs of the raw materials inputs and the sales values of intermediate and final products are often volatile. Change the data area of your worksheet to match the following:

hapter 07: Applying Excel
2
3	Data
4	Exhibit 7-6 Santa Maria Wool Cooperative
5	Cost of wool	$192,000
6	Cost of separation process	$40,000
7	Sales value of intermediate products at split-off point:
8	Undyed coarse wool	$110,000
9	Undyed fine wool	$168,000
10	Undyed superfine wool	$51,000
11	Costs of further processing (dyeing) intermediate products:
12	Undyed coarse wool	$50,000
13	Undyed fine wool	$60,000
14	Undyed superfine wool	$10,000
15	Sales value of end products:
16	Dyed coarse wool	$149,000
17	Dyed fine wool	$234,000
18	Dyed superfine wool	$90,000

If your formulas are correct, you should get the correct answers to the following questions.

a. What is the overall profit if all intermediate products are processed into final products?

overall profit from processing all intermediate prducts _______________

b. What is the residual income?

Coarse_______

Fine_______

Superfine_____-

c-1. With these new costs and selling prices, what recommendations would you make concerning the company’s operations?

c-2. If your recommendation in part (c-1) is followed, what would be the company’s overall profit?

Answer 1

a. Computation of Overall Profit if all intermediate Prodcut are processed further
Particular	Amount	Calculation
Combined Final Sales Value	$473,000	($149000+$234000+$90000)
Less: Cost of Producing the end Products
Cost of Wool	$192,000
Cost of Seperation process	$40,000
Combined cost of Dying	$120,000	($50000+$60000+$10000)
Profit	$121,000
b. Statement Showing Residual Income Particular Coarse Wool Fine Wool Super Fine Wool Final Sales Value after Further Processing $149,000 $234,000 $90,000 Less: Sales Value at the Split off Point $110,000 $168,000 $51,000 Incremental Revenue from further processing $39,000 $66,000 $39,000 Less: Cost of Further processing (Dying) $50,000 $60,000 $10,000 Profit /(Loss) from Further Processing -$11,000 $6,000 $29,000 C-1 it's recommended that Coarse Wool should be sell as is and Finel wool and Super Wine Wool Should be sold after Furtehr Processing C-2: Company Overall Profit as per Recommended Strategy Particular Coarse Wool Fine Wool Super Fine Wool Total Sell as is Process Further Process Further Sales $110,000 $234,000 $90,000 $434,000 Cost of Further Processing $60,000 $10,000 $70,000 Profit /(Loss) after Further Processing $110,000 $174,000 $80,000 $364,000 Less: Cost of Wool $192,500 Less : Cost of Seperation $40,000 $131,500