Larsen Company makes two products from a common input. Joint processing costs up
ID: 2417595 • Letter: L
Question
Larsen Company makes two products from a common input. Joint processing costs up to the split-off point total $47,800 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint processing costs
23,900
23,900
47,800
Sales value at split-off point
33,200
33,200
66,400
Costs of further processing
21,000
21,600
42,600
Sales value after further processing
52,700
60,400
113,100
What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?(Input a net disadvantage as a negative value. Omit the "$" sign in your response.)
b.
What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?(Input a net disadvantage as a negative value. Omit the "$" sign in your response.)
Explanation / Answer
a)Advantage /(disadvantage) = sale value after split off - further processing cost - sale value at split off
= 52700- 21000-33200
= -1500 (disadvantage)
b)Advantage /(disadvantage) = 60400 - 21600 -33200
= $ 5600 advantage
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