Joint Costs and a Decision on Processing Further.

The manager of the Parrot Division questions whether product EL-OA should be processed further.

Presently every batch of EL-O results in 3,750 units of EL-OA and 6,200 units of EL-QB.

eri cost of each batch is $19,900 and EL-OA sells for $3.60 a unit and EL-OB sells for 4.10 a unit.

If EL-OA is processed further, additional costs would be $5,625 a batch and EL-OA would sell for $5.00 a unit. Further processing would also produce 300 units of a byproduct BY-OA which could possibly be sold for $0.20 a unit.

Required:

a. Calculate the unit cost of EL-OA and EL-OB at split-off using sales values.

b. Should the Parrot Division continue to process EL-OA further?

LO.1