Solex Company manufactures three products from a common input in a joint process
ID: 2462374 • Letter: S
Question
Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $93,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $50,000; product Y, $95,000; and product Z, $61,000. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below: Compute the incremental profit (loss) for each product.Explanation / Answer
Particulars
Product X
Product Y
Product Z
Sales Further Processing
77,000
163,000
80,000
Less: Sales at Split off Point
(50,000)
(95,000)
(61,000)
Incremental Revenue
27,000
68,000
19,000
Less : Additional Processing Cost
(37,000)
(39,000)
(12,000)
Incremental Profit
(10,000)
29,000
7,000
Particulars
Product X
Product Y
Product Z
Sales Further Processing
77,000
163,000
80,000
Less: Sales at Split off Point
(50,000)
(95,000)
(61,000)
Incremental Revenue
27,000
68,000
19,000
Less : Additional Processing Cost
(37,000)
(39,000)
(12,000)
Incremental Profit
(10,000)
29,000
7,000
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