A company manufactures three products using the same production process. The costs incurred up to the split-off point are $200,000. These costs are allocated to

Question

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A company manufactures three products using the same production process. The costs incurred up to the split-off point are $200,000. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follows.

Instructions
(a) Which information is relevant to the decision on whether or not to process the products further? Explain why this information is relevant.
(b) Which product(s) should be processed further and which should be sold at the split-off-point?
(c) Would your decision be different if the company was using the quantity of output to allocate joint costs?Explain.

Number of Selling Price Selling Price Additional Product Units Produced at Split-Off after Processing Processing Costs 4,000 6,000 2,000 $10.00 11.60 19.40 $15.00 16.20 22.60 $14,000 20,000 9,000