Two products, IF and RI, emerge from a joint process. Two products, IF and RI, e

Question

Two products, IF and RI, emerge from a joint process. Two products, IF and RI, emerge from a joint process. Product IF has been allocated $16,300 of the total joint costs of $37,000. A total of 2,300 units of product IF are produced from the joint process. Product IF can be sold at the split-off point for $11 per unit, or it can be processed further for an additional total cost of $10,300 and then sold for $13 per unit. If product IF is processed further and sold, what would be the effect on the overall profit of the company compared with sale in its unprocessed form directly after the split-off point? $19,600 more profit $10,600 more profit $23,200 less profit $5,700 less profit

Explanation / Answer

$5,400 less profit


Final sales value after further processing $29,900 ($13 x 2,300)
Less: Sales value at split off point 25,300 ($11 x 2,300)
Incremental revenue from further processing $4,600
Less: Cost of further processing 10,300
Profit (loss) from further processing $(5,700)

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