Question

Product X and Y are made from a common input. Joint processing costs up to the split-off point total $46,000 a year. The company allocates these costs 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 concerning these products appear below: Product X Product Y Total Allocated joint processing costs $ 18,000 $ 28,000 $ 46,000 Sales value at split-off point $ 25,450 $ 37,100 $ 62,550 Costs of further processing $ 22,500 $ 16,800 $ 39,300 Sales value after further processing $ 47,200 $ 54,900 $ 102,100 Required: a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.) b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point? (Negative amount should be indicated by a minus sign.)

Answer 1

a	Financial Disadvantage of $ 750 for further processing of Product X
b	Financial Advantage of $ 1,000 for further processing of Product Y
		Product X         ( $)	Product Y ( $ )
	Sales Value after further processing	47,200	54,900
	Sales Value at Split off Point	-         25,450	-      37,100
	Incremental Revenue ( Sales Value after further processing - Sales Value at split off point )	21,750	17,800
	Cost of Further Processing	-         22,500	-      16,800
	Incremental Profit ( Loss )	-               750	1,000
	Thank You !