General Chemical Company (GCC) manufactures two products as part of a joint proc
ID: 2497901 • 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 $21,500. 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 $31,200, whereas product B1 can be sold for $72,800. Product A1 can be processed further to make product A2, at an incremental cost of $37,500. A2 can be sold for $84,500. Product B1 can be processed further to make product B2, at an incremental cost of $47,500. B2 can be sold for $94,500.
$6,450.
$15,050.
$10,750.
$21,500.
$53,300 (increase).
$15,800 (decrease).
$15,800 (increase).
$37,500 (increase).
$25,800 (increase).
$25,800 (decrease).
$47,500 (decrease).
$21,700 (increase).
Joint costs allocated to product B1 total:Explanation / Answer
The net change in operating income resulting from a decision to manufacture product A2 is:
The net change in operating income resulting from a decision to manufacture product B2 is:
GCC Details Product A1 Product B1 Total Sales Value at Split Off 31,200 72,800 104,000 % sales value 30.00% 70.00% Joint Cost alloacted 6,450 15,050 21,500 Net Income at split off 24,750 57,750 82,500 Further processing Products A2 B2 Sales value 84,500 94,500 179,000 Incremental cost 37,500 47,500 85,000 Total cost 43,950 62,550 106,500 Net Income further processing 40,550 31,950 72,500 Net Change in Income im further Processinh 15,800 (25,800) (10,000) a Joint Cost Allocated to B1 $ 15,050 b.The net change in operating income resulting from a decision to manufacture product A2 is:
$ 15,800 IncreaseThe net change in operating income resulting from a decision to manufacture product B2 is:
$ 25,800 Decrease.Related Questions
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