Question

Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $53,700 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	$	20,400		$	33,300		$	53,700
Sales value at split-off point	$	24,700		$	38,600		$	63,300
Costs of further processing	$	24,900		$	19,200		$	44,100
Sales value after further processing	$	49,200		$	59,700		$	108,900

Required:

a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point? (Input the amount as a positive value.)

b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? (Input the amount as a positive value.)

c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?

Answer 1