Winnovia Mills processes cotton in a joint process that yields two joint product

Question

Winnovia Mills processes cotton in a joint process that yields two joint products: fabric and yarn. May's joint cost is $120,000, and the sales values at split-off are $360,000 for fabric and $300,000 for yarn. If the products are processed beyond split-off, the final sales value will be $540,000 for fabric and $420,000 for yarn. Additional costs of processing are expected to be $120,000 for fabric and $102,000 for yarn.

a. Should the products be processed further?


Show computations.

Fabric Yarn
Final revenues $ $
Revenues at split-off $ $
Incremental revenues $ $
Incremental costs $ $
Net benefit (cost) of further processing $ $

Explanation / Answer

                                                  Fabric            Yarn
Final Revenues                            $540,000      $420,000
Revenues at split-off                  $360,000    $300,000
Incremental revenues                 $180,000       $120,000
Incremental costs                       $120,000     $102,000
Net benefit (cost) of      
further processing                      $60,000        $18,000

a. Should the products be processed further? Yes, product should be processed further as it add additional profit of $78,000 ($60,000 + $18,000) in total.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.