Question
Each week company A produces 15,000 pounds of Product A and 30,000 pounds of Product B by incurring a joint cost of $400,000. These two
Each week company A produces 15,000 pounds of Product A and 30,000 pounds of Product B by incurring a joint cost of $400,000. These two products can be sold as is or processed further. Further processing of either product does not delay the production of subsequent batches of the joint product. Data regarding these two products are as follows:
| Product A | Product B | ||||
Selling price per pound without further processing | $ | 12.00 |
| $ | 9.00 |
|
Selling price per pound with further processing | $ | 15.00 |
| $ | 11.00 |
|
Total separate weekly variable costs of further processing | $ | 50,000 |
| $ | 45,000 |
|
Select the option that maximizes profits for the firm.
A. Sell product A after further processing, and product B as is, at split-off
B. Sell product A as is at split-off, and sell product B after further processing.
C. Sell both product A and product B as is, at split-off.
D. Sell product A and product B after further processing.
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