Question

Victoria Contreras Company makes two products from a common input. Joint processing costs up to the split- off point total $48,600 a year. The company allocates these c0sts to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data conceming these products appear below: Total Product Y 29,800 37,800 17,600 Product X 48,600 63,650 18,800 Allocated joint processing costs Sales vale at split-offpoint Costs of fiurther processing 25,850 23,300 40,900 105,300 56,500 Sales value after further processing 48,800 Required: (Negative amount should be indicated by a minus sign.) What is financial advantage (disadvantage) of processing Product X beyond the split-off point? What is financial advantage (disadvantage) of processing Product Y beyond the split-off point? c0212 0 What is the minimum amount the company should accept for Product Y if it is to be sold at the split-o point? What is the minimum amount the company should accept for Product X if it is to be sold at the split-off oint? Eall 201

Answer 1

1. Financial advantage of processing Product X beyond the split-off point = (Sales value after further processing - Sales value at split-off point) - Costs of further processing

= ($48,800 - $25,850) - $23,300

= ($350)

2. Financial advantage of processing Product Y beyond the split-off point = (Sales value after further processing - Sales value at split-off point) - Costs of further processing

= ($56,500 - $37,800) - $17,600

= $1,100

3. Minimum amount the company should accept for Product X if it is sold at the split-off point = Joint costs allocated.

= $48,600 * $25,850 / $63,650

= $19,738

4. Minimum amount the company should accept for Product X if it is sold at the split-off point = Joint costs allocated.

= $48,600 * $37,800 / $63,650

= $28,862