Question

Exercise 7-11 Kirk Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Spock, Uhura, and Sulu. Each of these products can be sold as is, or each can be processed further and sold for a higher price. The company incurs joint costs of $177,000 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product. Spock Uhura Sulu Sales Value at Split-off Point $209,000 299,000 454,000 Allocated Joint Costs $39,000 59,000 79,000 Cost to Process Further $109,000 84,000 249,000 Sales Value of Processed Product $299,000 399,000 799,000 Determine the incremental profit or loss that each of the three joint products. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Spock Sulu Incremental profit (loss) Indicate whether each of the three joint products should be sold as is, or processed further. Spock Uhura Sulu

Answer 1

Sales Value at Split off Point Less: Allocated joint costs Profit (Loss) at Split off point Profit of Loss at Split off point Spock Uhura $ 209,000 $ 299,000 $ 39,000 $ 59,000 $ 170,000 $ 240,000 $ $ $ Sulu 454,000 79,000 375,000 $ $ $ Total 962,000 177,000 785,000 Profit of Loss if sold after futher processing Spock Uhura Sales Value of Processed Product $ 299,000 $ 399,000 $ Less: Allocated joint costs 39,000 $ 59,000$ Less: Cost to Process Further 109,000 $ 84,000 $ Profit (Loss) after further processing $ 151,000 $ 256,000 $ Sulu 799,000 $ 79,000 $ 249,000 $ 471,000$ Total 1,497,000 177,000 442,000 878,000 Incremental profit (loss) $ 93,000 $ (19,000) $ 16,000 ($ 151,000 - $ ($ 256,000 - $ 170,000) 240,000) $ 96,000 ($ 471,000 - $ 375,000) Decision Spock Uhura Sulu Sell as is Process further Process further as it result in incremental loss of $ 19,000 after further processing as it results in incremantal profit of $ 16,000 after further processing as it results in incremantal profit of $ 96,000 after further processing