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E7-12 A company manufactures three products using the same production process. The costs incurred up to the split-off point are $200,000. These costs are
E7-12 A company manufactures three products using the same production process. The costs incurred up to the split-off point are $200,000. These costs are allocated to the prod- ucts 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 pro- cessing, and the additional processing costs are as follows. Number of Selling Price Selling Price Product Units Produced at Split-Off after Processing Additional Processing Costs D 4,000 $10.00 $15.00 $14,000 E 6,000 11.60 16.20 20,000 F 2,000 19.40 22.60 9,000 Instructions (a) Which information is relevant to the decision on whether or not to process the prod- ucts further? Explain why this information is relevant. (b) Which product(s) should be processed further and which should be sold at the split- off point? (c) Would your decision be different if the company was using the quantity of output to allocate joint costs? Explain.
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