Ibsen Company makes two products from a common input. Joint processing costs up
ID: 2598583 • Letter: I
Question
Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $45,100 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 $ 17,900 $ 27,200 $ 45,100 Sales value at split-off point $ 25,400 $ 37,000 $ 62,400 Costs of further processing $ 22,400 $ 16,700 $ 39,100 Sales value after further processing $ 47,000 $ 54,700 $ 101,700Explanation / Answer
Product X Product Y Sales value after further processing 47000 54700 Sales value at split-off point 25400 37000 Incremental revenue 21600 17700 Costs of further processing 22400 16700 Financial advantage (disadvantage) -800 1000
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