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14P7.57B (LO 4) The following information is for a company that produces four types of microprocessors using the same production process. The common costs of
14P7.57B (LO 4) The following information is for a company that produces four types of microprocessors using the same production process. The common costs of these products, up to the split-off point, are $550,000. Common costs are allocated based on the quantity of output. The following information includes additional processing costs, the selling price of each product at the split-off point, and the selling price of each product after further processing: Prepare an incremental analysis for the decision whether to sell or process materials further. Number of Units Microprocessor Produced 1 3,000 Selling Price at Split-Off Point $10.00 Selling Price after Further Processing $15.00 Additional Costs for Further Processing $14,800 2 4,000 9.50 12.25 8,500 3 2,500 11.00 15.70 12,000 500 7.75 10.25 1,250 Instructions a. Assuming only one product can be processed further, determine which one the company should choose. Briefly explain why. Product 2 b. Referring to your answer in part P7.57Ba., identify which information is relevant to the decision to process this product further. C. If common costs up to the split-off point were allocated on the basis of the market values at the split-off point, would your decision in part P7.57Ba. be different? Briefly explain why
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