Question

1 Mitchener Corp. manufactures three products from a common input in a joint processing operation. 2 Joint processing costs up to the split-off point total $300,000 per year. 3 The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. 4 Each product may be sold at the split-off point or processed further. 5 The additional processing costs and sales value after further processing for each product (on an annual basis) are: 8 Sales Value at Split-Off Further Processing Costs Sales Value After Further Processing 11 Felcore 12 Greatnest 13 Highlander 14 lopia 15 Justrite 16 185,000 195,000 325,000 275,000 155,000 85,000 110,000 45,000 55,000 70,000 275,000 290,000 380,000 325,000 235,000 18 Which product or products should be sold at the split-off point, and which products or products 19 should be processed further? (Show computations)

Answer 1

	Sales Value at Split-Off	Further Processing Costs	Sales Value After Further Processing	Incremental Sales Revenue	Incremental Profit / Loss
Felcore	185,000	85,000	275,000	275,000-185,000 = 90,000	90,000-85,000= 5,000
Greathnest	195,000	110,000	290,000	290,000-195,000 = 95,000	95,000-110,000= -15,000
Highlander	325,000	45,000	380,000	380,000-325,000 = 55,000	55,000-45,000 = 10,000
Iopia	275,000	55,000	325,000	325,000-275,000 = 50,000	50,000-55,000 = -5,000
Justrite	155,000	70,000	235,000	235,000-155,000 = 80,000	80,000-70,000 = 10,000

From the above analysis it can be seen that products Greathest and Iopia should be sold at the split off since if these are processed further, they will provide losses and products Feclore , Highlander and Justrite should be processed further.

Kindly comment if you need further assistance. Thanks‼!