Print Item Sell at Split-Off or Process Further Bozo Inc. manufactures two produ

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Print Item Sell at Split-Off or Process Further Bozo Inc. manufactures two products from a joint production process. The joint process costs $110,000 and yields 6,000 pounds of LTE compound and 14,000 pounds of HS compound. LTE can be sold at split-off for SSS per pound. HS can be sold at split-off for S8 per pound. A buyer of HS asked Bar to proces further into CS compound. If HS were processed further, it would cost $39,100 to turn 14,000 pounds of HS into 4,000 pounds of CS. The CS would sell for $s6 per pound. Required: 1. What is the contribution to income from elling the 14,000 pounds of HS at splt-off? 2. CONCEPTUAL CONNECTION: What is the contribution to income from processing the 14,000 pounds of HS into 4,000 pounds of CS? ) should Bozo continue to sell the HS at split-off or process it further into CS? Continue to sell the HS at split-off Previous Check My Work 3 more Check My Work uses remaising 04 PM

Explanation / Answer

1 calculation of contribution income from selling 14000 pounds of hs at split off revenue 1 2 3 4 product pounds selling price total revenue ( 2 * 3 ) LTE 6000 55 330000 HS 14000 8 112000 total revenue ( 330000 + 112000 ) 442000 less, joint cost 110000 contribution margin ( 442000 - 110000 ) 332000 2 contribution income from processing the 14000 pounds of HS into 4000 pounds of CS product pounds selling price total revenue ( 2 * 3 ) LTE 6000 55 330000 CS 4000 56 224000 total revenue ( 330000 + 224000 ) 554000 less, joint cost 110000 less, further processing cost of HS 39100 contribution margin ( 442000 - 110000 - 39100 ) 404900 the company should process HS for further into CS , as the contribution margin is high

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