Center Company currently produces three products from a joint process. The joint

Question

Center Company currently produces three products from a joint process. The joint process has total costs of $508,000 per month. All three products, A, B & C, are immediately saleable as they come out of the joint process. Alternatively, any of the products could continue on with additional processing and be sold as a more complete product. The following information is available:

   

a-1. Should Product A be sold immediately or sold after processing further?

a-2. How much will the decision affect profit?



b-1. Should Product B be sold immediately or sold after processing further?

  

b-2. How much will the decision affect profit?



c-1. Should Product C be sold immediately or sold after processing further?

c-2. How much will the decision affect profit?

Units Immediate Sales Price Later Sales Price Unit Cost of Further Processing A 4,400 $ 17 $ 20 $ 4.00 B 17,900 $ 21 $ 24 $ 2.50 C 10,400 $ 28 $ 32 $ 1.00

Explanation / Answer

a1) Sell Now

a2) loss will decrease by = (4400*1) = -4400

b1) Sell later

b2) Profit will increase by (17900*.50) = 8950

c1) Sell later

c2) Profit will increase by (3*10400) = 31200

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