Iaukea Company makes two products from a common input. Joint processing costs up
ID: 2462775 • Letter: I
Question
Iaukea Company makes two products from a common input. Joint processing costs up to the split-off point total $47,600 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs $ 23,800 $ 23,800 $ 47,600
Sales value at split-off point $ 34,000 $ 34,000 $ 68,000
Costs of further processing $ 20,900 $ 21,800 $ 42,700
Sales value after further processing $ 53,600 $ 60,100 $ 113,700
What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point? <----- having trouble with this one specifically.
d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point? <----- having trouble with this one specifically.
Explanation / Answer
SOLUTION :
a.&b.
X
Y
TOTAL
Sales value after further processing
53,600
60,100
113,700
Less :Costs of further processing
20,900
21,800
42,700
benefit of further processing
32,700
38,300
71,000
Less :Sales value at split-off point
34,000
34,000
68,000
Net advantage/(Disadvantage)
- 1,300
4,300
3,000
c.&d.
X
Y
minimum amount the company should accept if it is to be sold at the split-off point
32,700
38,300
Minimum price is to be equal to benefit from further processing else further processing will be more beneficial.
a.&b.
X
Y
TOTAL
Sales value after further processing
53,600
60,100
113,700
Less :Costs of further processing
20,900
21,800
42,700
benefit of further processing
32,700
38,300
71,000
Less :Sales value at split-off point
34,000
34,000
68,000
Net advantage/(Disadvantage)
- 1,300
4,300
3,000
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