In: Accounting
6-A3 Joint Products: Sell or Process Further
The Mussina Chemical Company produced three joint products at a joint cost of $117,000. These products were processed further and sold as follows:
Chemical Product | Sales | Additional Processing Costs |
A | $230,000 | $190,000 |
B | $330,000 | $300,000 |
C | $175,000 | $100,000 |
The company has had an opportunity to sell at split-off directly
to other processors. If that alternative had been selected, sales
would have been A, $54,000; B, $32,000; and C, $54,000.
The company expects to operate at the same level of production and
sales in the forthcoming year.
1. Could the company increase operating income by altering its
processing decisions? If so, what would be the expected overall
operating income?
2. Which products should be processed further and which should be
sold at split-off?
Above question is about a product whether it should be further processed or sold at split off value. Refer below images for more detailed solution.