Question

Gary Company produces products X, Y, and Z from a single raw material input. Budgeted data

      for the next month is as follows:            

                                                                                                            Product                                  

                                                                             X                                 Y                                  Z    

Units produced                                       2,500                          3,000                           4,000

Per unit sales value at split-off                    $20                                $22                              $25

Costs of processing further per unit              $8                               $8.50                              $8

Per unit sales value if processed further    $30                               $30                               $35

                                                                                                               

If the raw material input cost $150,000, which products should be processed beyond the split-off point?

Question 3 options:

	x - no y - yes z - no
	x - no y - yes z - yes
	x - yes y - no z - yes
	x - yes y - yes z - no

Answer 1

Incremental analysis

	X	Y	Z
Sales revenue after further processing	30	30	35
Sales revenue at split off	20	22	25
Incremental revenue	10	8	10
Incremental Cost	-8	8.50	-8
Incremental profit (loss)	2	-0.50	-2
Analysis	Yes	No	Yes

So answer is c) Yes, No, Yes