A company manufactures three products using the same production process. The costs incurred up to the split off point are 2,000,000. These costs are allocated

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 ¥2,000,000. 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 at Split-Off Selling Price after Processing Processing Costs Additional Product Units Produced D 4,000 6,000 2,000 100 150 140,000 E 116 162 200,000 F 194 226 90,000