Company produces three joint products. At the split offpoint three basic prodcut

Question

Company produces three joint products. At the split offpoint three basic prodcuts emerge A,B, and C. each productcan be either sold at the split off point or be processedfurther. if they are processed further, the reultingproducts can be sold as a speciality. Cost and revenue infofollows:                                                            Sales Value & Additional                                                            Costsif Processed Further                                           Pounds       Sales Value       FinalSales   Additonal Product                              produced    atsplit-off            value          cost A......................................9,000          $60,000            $90,000      $35,000 B......................................4,000            80,000             160,000      50,000 C.......................................2,000           70,000              85,000       14,000 **At what price per pound would it be advanatageous for thecompany to sell B at the split-off point rather then process itfurther? Company produces three joint products. At the split offpoint three basic prodcuts emerge A,B, and C. each productcan be either sold at the split off point or be processedfurther. if they are processed further, the reultingproducts can be sold as a speciality. Cost and revenue infofollows:                                                            Sales Value & Additional                                                            Costsif Processed Further                                           Pounds       Sales Value       FinalSales   Additonal Product                              produced    atsplit-off            value          cost A......................................9,000          $60,000            $90,000      $35,000 B......................................4,000            80,000             160,000      50,000 C.......................................2,000           70,000              85,000       14,000 **At what price per pound would it be advanatageous for thecompany to sell B at the split-off point rather then process itfurther?

Explanation / Answer

Final Sales Value of Product B 160,000.00 Additional Cost of furtherprocessing (50,000.00) Incremental Revenue 110,000.00 Pounds Produced 4,000.00 Sale Price at split offpoint 110000/4000 Sale Price atsplit off point to get the full 27.50 advantage

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