1: 2 Question 2 (10 points) GH Ltd. manufactures three main products from a common input in a joint processing operation. Joint processing costs up to the split-off point are as follows: Direct materials $75,000 Direct labour 90,000 Supervisor's salary 75.000 Security 25,000 Custodian salaries 20,000 12 Utilities 15,000 5 The company allocates these costs to the joint products on-the-basis of their total sales at the split-off point. Each of the products may be sold at the split-off point or processed further. The additional processing costs and sales value after further processing for each product, on an annual basis, are: Product Sales Value at Split- Further Processing Sales Value After off 1030 $150,000 1060 $100,000 2010 $ 50,000 Costs $ 75,000 $95,000 $ 85,000 Further Processing $230,000 $180,000 $160,000 The "Further Processing Costs" consist of variable and avoidable fixed costs. age 1: 2 1 Costs $150,000 $ 75,000 Further Processing $230,000 $100,000 $ 95,000 $180,000 50,000 $ 85,000 $160,000 1030 off 3 1060 2010 8 9 12 112 15 The "Further Processing Costs" consist of variable and avoidable fixed costs. Required: a) Which product or products should be sold at the spilt-off point, and which product or products should be processed further? Show computations. b) F18 is a minor by-product of the above process and is not included in the above calculations. It is sold after minor further processing. The following information has been provided: Sales $6,000 18 Variable costs 1,000 Traceable fixed costs 3,000 Common fixed costs 5,000 Operating loss ($3,000) What would happen to GH Ltd.'s operating income if F18 was scrapped at no cost at the split-off point rather than processed further? Should GH Ltd. process F18 further