Joint Cost Cheyenne, Inc. produces three products from a common input. The joint costs for a typical quarter follow:

Direct materials		$50,000
Direct labor		60,000
Overhead		65,000

The revenues from each product are as follows:

Product A		$77,500
Product B		82,500
Product C		32,500

Management is considering processing Product A beyond the split-off point, which would increase the sales value of Product A to $116,000. However, to process Product A further means that the company must rent some special equipment costing $17,500 per quarter. Additional materials and labor also needed would cost $12,650 per quarter.

a. What is the gross profit currently being earned by the three products for one quarter?

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b. What is the effect on quarterly profits if the company decides to process Product A further?

$Answer