General Chemical Company (GCC) manufactures two products as part of a joint proc
ID: 2480559 • Letter: G
Question
General Chemical Company (GCC) manufactures two products as part of a joint process: A1 and B1. Joint costs up to the split-off point total $20,000. The joint costs are allocated to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1 can be sold for $30,300, whereas product B1 can be sold for $70,700. Product A1 can be processed further to make product A2, at an incremental cost of $36,000. A2 can be sold for $83,000. Product B1 can be processed further to make product B2, at an incremental cost of $46,000. B2 can be sold for $93,000.
General Chemical Company (GCC) manufactures two products as part of a joint process: A1 and B1. Joint costs up to the split-off point total $20,000. The joint costs are allocated to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1 can be sold for $30,300, whereas product B1 can be sold for $70,700. Product A1 can be processed further to make product A2, at an incremental cost of $36,000. A2 can be sold for $83,000. Product B1 can be processed further to make product B2, at an incremental cost of $46,000. B2 can be sold for $93,000.
Joint costs allocated to product A1 total:-6000
-14000
-10000
-20000
Joint costs allocated to product B1 total:
-6000
-14000
-10000
-20000
The net change in operating income resulting from a decision to manufacture product A2 is:
-52700increase
-16700decrease
-16700increase
-36000increase
Explanation / Answer
Joint costs allocated to product A1 total:
$6000
Joint costs allocated to product B1 total:
$14000
The net change in operating income resulting from a decision to manufacture product A2 is:
16700
A1 B1 Sales 30300 70700 Percentage to total sales 0.3 0.7 20000 joint cost allocated 6000 14000Related Questions
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