XYZ Corporation makes two products from a common input. Joint processing costs u

Question

XYZ Corporation makes two products from a common input. Joint processing costs up to the split-off point total $33,600 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 Product X: $19,600 Product Y: $14,000 Sales value at split-off point Product X: $28,000 Product Y: $20,000 Costs of further processing Product X: $22,400 Product Y: $15,700 Sales value after further processing Product X: $53,500 Product Y: $33,500 Required: 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?

Explanation / Answer

Hi, Please find the answers as follows: Product X Sales value after further processing 53500 Costs of further processing 22400 Benefit associated with further processing 31100 Product Y Sales value after further processing 33500 Costs of further processing 15700 Benefit associated with further processing 17800 Therefore the minimum selling price at split off point would be 31100 for X and 17800 for Y. Thanks, Aman

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