Ibsen Company makes two products from a common input. Joint processing costs up

Question

Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $48,500 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:

Required:

a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.)

b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point? (Negative amount should be indicated by a minus sign.)

Product X Product Y Total Allocated joint processing costs $ 18,700 $ 29,800 $ 48,500 Sales value at split-off point $ 25,800 $ 37,750 $ 63,550 Costs of further processing $ 23,200 $ 17,500 $ 40,700 Sales value after further processing $ 48,600 $ 56,300 $ 104,900

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Product X Product Y Sales Value after further processing                 48,600.00               56,300.00 Sales Value at split off point                 25,800.00               37,750.00 Incremental revenue per pound or gallon                 22,800.00               18,550.00 Total Incremental Processing costs                 23,200.00               17,500.00 financial advantage (disadvantage)                       (400.00)                 1,050.00 a) financial (disadvantage) - Product X                     (400.00) b) financial advantage - Product Y                   1,050.00

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