4 Morrell Company produces several products from processing krypton, a rare mine

Question

4

Morrell Company produces several products from processing krypton, a rare mineral. Material and processing costs total $30,000 per ton, one-third of which are allocated to the product merifulon. The merifulon produced from a ton of krypton can either be sold at the split-off point, or processed further at a cost of $13,000 and then sold for $60,000. The sales value of merifulon at the split-off point is $40,000.

Required:

Compute the profit from further processing for merifulon.

Sales value after further processing

Sales value at the split-off point

Incremental revenue from further processing

Cost of further processing

Profit from further processing

Should merifulon be processed further or sold at the split-off point?

Select your answer:

Should be sold at the split off point.

Should be processed further

Morrell Company produces several products from processing krypton, a rare mineral. Material and processing costs total $30,000 per ton, one-third of which are allocated to the product merifulon. The merifulon produced from a ton of krypton can either be sold at the split-off point, or processed further at a cost of $13,000 and then sold for $60,000. The sales value of merifulon at the split-off point is $40,000.

Explanation / Answer

Statement showing Computations Particulars Amount Sales value after further processing            60,000.00 Sales value at the split-off point            40,000.00 Incremental revenue from further processing            20,000.00 Cost of further processing            13,000.00 Profit from further processing               7,000.00 Should be processed further as there will be more profit of $7,000

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