Faulk Company has a joint process, which produces three products, X, Y, and Z. Each product may be sold at splitoff or processed further and then sold. Joint processing costs for a year amount to $30,000. Other relevant data are as follows:

Separable

Processing

Sales Value Costs after Sales Value

Product at Splitoff Splitoff at Completion

X $15,500 $2,200 $17,700

Y 18,000 8,000 23,000

Z 24,000 11,500 37,500

Required:

a. What will be the effect on profits of processing each product further?

b. Assume the company maximizes profits, what is Faulk Companys operating income?