Two products, IF and RI, emerge from a joint process. Product IF has been alloca

Question

Two products, IF and RI, emerge from a joint process. Product IF has been allocated $13,300 of the total joint costs of $34,000. A total of 2,000 units of product IF are produced from the joint process. Product IF can be sold at the split-off point for $12 per unit, or it can be processed further for an additional total cost of $10,000 and then sold for $14 per unit. If product IF is processed further and sold, what would be the effect on the overall profit of the company compared with sale in its unprocessed form directly after the split-off point?

Explanation / Answer

Further processing increases costs by 10,000. Further processing also increases revenue by 2*2000 = 4,000 ($2 more per unit times 2000 units) So further processing would decreae profit by 6,000

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