Question

Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $60,000 per ton, one-fourth of which is allocated to product X15. Seven thousand units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $9 each, or processed further at a total cost of $9,500 and then sold for $12 each.

Required:

1. What is the financial advantage (disadvantage) of further processing product X15?

2. Should product X15 be processed further or sold at the split-off point?

Answer 1

Solutions Griven data, Matericel and processing costs total $60000 perton. Tour units of products $15 are produced. Pro tose 9500 Sold at the split-off pânt Sold for $12 each foo & geach. further Increment al Sales revenue 7000 X (12-9) = $ 21000 $ 9500 lesso Incremental cost ' . Incremental income or) Ner final cial advantage. . & 11500 financial advantage 11500 product xis should be poucessed furother