Question

10. value: 1.25 points Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $31,000 per ton, one-fourth of which is allocated to product X15. 7,000 units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $14.00 each, or processed further at a total cost of $11,000 and then sold for $18.67 each. Required: Should product X15 be processed further or sold at the split-off point? O Should be processed further. O Should be sold at the split off point.

Answer 1

1) Profit if X15 is sold at the split off point

Cost of processing 1 ton of clypton is $31000, 1/4 of which is allocated to X15 = $7750

7000 units of X15 can be sold at $14 = $98000

Profit = $98000 - $7750 = $90250

2) Profit if X15 is sold after further processing

Cost of processing 1 ton of clypton is $31000, 1/4 of which is allocated to X15 = $7750

Further processing cost = $11000

7000 units of X15 can be sold at $18.67 after further processing = $130690

Profit = $130960 - $7750 - $11000 = $112210

Profit is more by $21960 if X15 is sold after further processing

Product X15 should be processed further