Question

Profit from Processing Further Deaton Corporation manufactures products A, B, and from a joint process. Joint costs are allocated on the basis of relative sales value of the products at the split-off point. Additional information for Deaton Corporation follows: Total Units produced 12,000 8,000 4,000 24,000 Joint costs $144,000 $60,000 $36,000 $240,000 Sales value before additional processing 240,000 100,000 60,000 400,000 Additional costs for further processing 28,000 20,000 12,000 60,000 Sales value if processed further 280,000 120,000 70,000 470,000 . Required: 2a. For each of the three products (A, B, and C), calculate the differential benefit (loss) from processing the product after the split-off point rather than selling the product at the split-off point. (Loss amounts should be indicated with a minus sign.) Differential benefit (loss) 2b. Which, if any, of products A, B, and C should be processed further and then sold?

Answer 1

A Particulars Units Sale Value after further processing Joint costs Additional costs for further processing Total cost Profit after further processing 12,000 280,000 144,000 28,000 172000 108000 B 8,000 120,000 60,000 20,000 80,000 40,000 4,000 70,000 36,000 12,000 48,000 22000 | B Particulars Sale Value before further processing Joint costs Profit before further processing A 240,000 144,000 96000 100,000 60,000 40,000 60,000 36,000 24000 Statement showing differential benefit(loss) from processing the product after split off point rather than selling at the split off point 22000 Particulars Profit after further processing Profit before further processing Benefit(loss) from further processing 108000 96000 12000 40,000 40,000 24000 -2000 Only product A should be further processed