The Meadows Company manufactures a number of products from the same raw material

Question

The Meadows Company manufactures a number of products from the same raw material. Joint processing costs total $10,000 per month. Product Z could be sold at the cut-off point for $18,000 per month or it can be further processed at a cost of $9,000 per month and then sold for $26,000. Meadows Company should:
Answer


further process product Z because its incremental revenues will exceed incremental costs by $7,000.

further process product Z because its incremental revenues will exceed incremental costs by $17,000.

sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $1,000.

sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $7,000.

Explanation / Answer

Present cost = 10,000 Present sale value $18,000 Profit on sale $8,000 Cost with processing = 19,000 Sale value = 26,000 Profit on sale $7,000 Disadvantage with processing = $8,000 - $7,000 =$1,000 Meadows Company should: Answer sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $1,000.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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