Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare

Question

Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $53,000 per ton, one-fourth of which is allocated to product X15. Eight thousand three hundred units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $10 each, or processed further at a total cost of $7,100 and then sold for $13 each. Required 1. What is the financial advantage (disadvantage) of further processing product X15? 2. Should product X15 be processed further or sold at the split-off point? 2. Product X15 should be

Explanation / Answer

1. Sale value if processed further = 8,300 x 13 = $107,900

Sale value at split-off-point = 8,300 x 10 = $83,000

Incremental revenue = $24,900

Cost of further processing = $7,100

Net advantage of processing further = $17,800

2. Product X15 should be processed further

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