In a joint processing operation, Nolen Company manufactures three grades of suga

Question

In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane.

2 In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input sugar cane. Joint processing costs up to the split-off point total $70,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: raw sugar, $35,000; brown sugar, $38,250; and white sugar, $46,500 Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below Additional Product Processing Costs Value $37,025 $27,050 $28,750 Sales Raw sugar Brown sugar White sugar $70,000 $67,375 $91,000 Required a. Compute the Incremental profit (loss) for each product. (Loss amounts should be indicated by a minus sign.) Raw Sugar Brown Sugar White Sugar Incremental profit (loss) b. Which product or products should be sold at the split-off point? (Select all that apply.) Raw sugar Brown sugar White su c. Which product or products should be processed further? (Select all that apply.) Raw sugar Brown sugar White sugar

Explanation / Answer

Raw sugar Brown sugar White sugar Sales revenue after further processing 70000 67735 91000 Sales revenue at split off point 35000 38250 46500 Incremenal revenue 35000 29485 44500 Additional processing costs 37025 27050 28750 Incremental profit(loss) -2025 2435 15750 b Raw sugar should be sold at split-off point c Brown sugar and white sugar should be processed further

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