Complex Company produces three products in a joint production process. Raw materials are put into production in Department A, and at the end of processing in this department, three products appear. Product X is immediately sold at the splitoff point, with no further processing. Products Yand Z require further processing before they are sold. Product Y is processed in Department B, and product Z is processed in Department C.

Following is a summary of costs and other data for the quarter ended September 30.

a. Assume that the entire output of product X could be processed further at an additional cost of $2.00 per pound and then sold at a price of $4.30 per pound. What is the effect on operating profits if all the product X output for the quarter had been processed and sold, rather than all being sold at the split-off point?
b. Write a memo to management indicating whether the company should process Product X further and why.

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Products Pounds Produced and Sold Sales Revenues 37 140,000 $280,000 118,000 $177,000 220,000 $245,000 Departments Raw Material Costs Direct Labor Cost Manufacturing Overhead $112,000 48,000 20,000 S0 $80,900 21,100 S0 $191,750 73,250