Question

Exercise G Raiders Company manufactures two joint products. At the split-off point, they have sales values of: Product 1 $18 per unit Product 2 12 per unit After further processing, the company can sell them for $36 and $16, respectively. Product 1 costs $12 per unit to process further and Product 2 costs $8 to process further. Should further processing be done on either or both of these products? Why or why not?

Exercise G Process Further Split off Revenue Product Revenue Cost см 1 18 2 12 Net Advantage/(Dis advantage) of further Revenue Cost Differential Differential processing Product 1 2 (Process further revenue split off revenue) (Additional cost to process)

Answer 1

		Process further
Product	Split off Revenue	Revenue	Cost	CM
1	18	36	12	24
2	12	16	8	8
Product	Revenue Differential	Cost Differential	Net Advantage
1	18	12	6
2	4	8	-4
Hence, Product 1 Should be processed further and not product 2

E Split off Revenue 1 2 Product 3 1 4 2 Process further Cost 12 8 Revenue 36 16 18 CM =C3-D3 =C4-04 12 6 Revenue Differential Cost Differential Net Advantage =C3-B3 =D3 =B8-C8 =C4-B4 =B9-09 =D4 7 Product 8 1 92 10 11 Hence, Product 1 Should be processed further and not product 2 12