Solex Company manufactures three products from a common input in a joint process

Question

Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $50,000; product Y, $90,000; and product Z, $60,000.

     Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Compute the incremental profit (loss) for each product. (Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)

Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

Which product or products should be processed further? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

     Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Explanation / Answer

Product X Product Y Product Z

Sales value after further processing $ 80,000 $150,000 $ 75,000

Sales value at split-off point 50,000 90,000 60,000

Incremental revenue 30,000 60,000 15,000

Cost of further processing 35,000 40,000 12,000

Incremental profit (loss) - $ (5,000) $ 20,000 $ 3,000

SO ANSWERS are:

A.)X: -$5000

Y:$20,000

Z:$3,000

B.)Product X

C.)Product Y and Product Z

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