Question

Benjamin Company produces products C, J, and R from a joint production process. Each product may...

  1. Benjamin Company produces products C, J, and R from a joint production process. Each product may be sold at the split-off point or processed further. Joint production costs of $95,000 per year are allocated to the products based on the relative number of units produced. Data for Benjamin's operations for last year follow:

Units Produced

Sales Values at Split-Off

Sales Values If Processed Further

Costs of Processing Further

Product C

6,000

$75,000

$100,000

$20,000

Product J

9,000

$70,000

$115,000

$36,000

Product R

4,000

$46,500

$55,000

$10,000

Required:

Which products should be processed beyond the split-off point?

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Answer #1

Answer:

C J R
Sales value after further processing 100000 115000 55000
Sales value after split off 75000 70000 46500
Added sales value after processing 25000 45000 8500
Added processing cost 20000 36000 10000
Net gain( loss) from further processing 5000 9000 (1500)

Explanation

Product C and J should process beyond the split off point . Product R should sold at split - off . Joint production cost are not relevant to the decision to sell at split off or to process further

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