Paulsen Corporation makes two products, W and P, in a joint process. At the split-off point, 50,000 units of W and 60,000 units of P are available each month. Monthly joint production costs are $290,000. Product W can be sold at the split-off point for $5.60 per unit. Product P either can be sold at the split-off point for $4.75 per unit or it can be further processed and sold for $7.20 per unit. If P is processed further, additional processing costs of $3.10 per unit will be incurred.
What would the selling price per unit of Product P need to be after processing in order for Paulsen Corporation to be economically indifferent between selling P at the split-off point or processing P further?
$7.85
$8.58
$9.49
$11.68