Question

TB Problem Qu. 12-203 Ibsen Company makes two products from a common ... Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $40,500 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: Allocated joint processing costs Sales value at split-off point Costs of further processing Sales value after further processing Product X $ 16, 200 $ 20,000 $ 22,500 $ 37,200 Product Y $ 24,300 $ 30,000 $ 16,800 $ 54,900 Total $ 40,500 $ 50,000 $ 39,300 $ 92,100 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? c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point? d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point? a. Financial disadvantage b. Financial advantage c. Minimum acceptable amount d. Minimum acceptable amount

Answer 1

	Product X	Product Y
Sales value after further processing	37200	54900
Less: Costs of further processing	22500	16800
Benefit of further processing	14700	38100
Less: Sales value at split-off point	20000	30000
Net advantage (disadvantage)	-5300	8100
a. Financial disadvantage	-5300
b. Financial advantage	8100
c. Minimum acceptable amount	14700
d. Minimum acceptable amount	38100