Cheyenne, Inc. produces three products from a common input. The joint costs for atypical quarter follow:

The revenues from each product are as follows:

Management is considering processing Product A beyond the split-off point, which would increase the sales value of Product A to \($116,000.\) However, to process Product A further means that the company must rent some special equipment costing \($17,500\) per quarter. Additional materials and labor also needed would cost \($12,650\) per quarter.
Required

a. What is the gross profit currently being earned by the three products for one quarter?

b. What is the effect on quarterly profits if the company decides to process Product A further?

Transcribed Image Text:

Direct materials $45,000 Direct labor. 55,000 Overhead 60,000