Question
Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The company allocates these
Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs 22,400 19,600 42,000
Sales value at split off point 32,000 28,000 60,000
Costs of further processing 11,600 25,300 36,900
Sales value after further processing 40,800 54,200 95,000
Required:
- What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point? Show your work.
- What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? Show your work.
- What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
- What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?
Please Explain. Thank you.
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