Question
A company manufactures three products using the same production process. The costs incurred up to the split-off point are $232,000. These costs are allocated to
A company manufactures three products using the same production process. The costs incurred up to the split-off point are $232,000. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follow:
| Product | Number of Units Produced | Selling Price at Split-off | Selling Price after Processing | Additional Processing Costs | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| X | 5,800 | $12.00 | $17.00 | $16,240 | |||||||||
| Y | 11,600 | 12.20 | 16.80 | 24,360 | |||||||||
| Z | 4,640 | 20.00 | 22.20 | 13,920 | |||||||||
Which product(s) should be processed further and which should be sold at the split-off point?
Products X&Y should be processed further but Product Z should be sold at the splitoff point.
(b) Would your decision be different if the company was using the quantity of output to allocate joint costs?
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Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes
11th edition
978-0077861643
