Question
2 (10 marks) Dirt Company produces two products from a joint production process: Slime and Mold. The two products are made from a single raw
2 (10 marks) Dirt Company produces two products from a joint production process: Slime and Mold. The two products are made from a single raw material called Goo. A load of Goo costs $80,000, from which 14,700 units of Slime and 13,700 units of Mold can be produced each period. Slime can be sold at the split-off point for $220.00 per unit, or the 14,700 units can be processed further for an additional total cost of $965,900 and then sold for $367.00 per unit. Mold can be sold at the split-off point for $332.00 per unit, or the 13,700 units can be processed further for an additional total cost of $677,700 and then sold for $554.00 per unit. Part 1. If the company processes Slime further, how much will operating income change? A) increase by $2,160,900 B) decrease by $2,390,000 C) increase by $597,500 D) decrease by $1,195,000 E) decrease by $432,180 F) increase by $1,195,000 G) increase by $2,390,000 Part 2. If the company processes Mold further, how much will operating income change? A) increase by $3,041,400 B) increase by $2,363,700 C) decrease by $608,280 D) decrease by $4,727,400 E) increase by $1,181,850 F) increase by $4,727,400 G) decrease by $2,363,700
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