Question
Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $48,600 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 $48,600 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 $ 18,800 $ 29,800 $ 48,600 Sales value at split-off point $ 25,850 $ 37,800 $ 63,650 Costs of further processing $ 23,300 $ 17,600 $ 40,900 Sales value after further processing $ 48,800 $ 56,500 $ 105,300
Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point? (Input the amount as a positive value.)
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? (Input the amount as a positive value.)
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?
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