Joint Cost

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

Direct materials $$48,000$

Direct labor $58,000$

Overhead $63,000$

The revenues from each product are as follows:

Product A $$74,000$

Product B $79,000$

Product C $29,000$

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?

$Answer

$0$

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

$Answer

$0$Joint Cost

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

$\backslash$table$[[$Direct materials,$$48,000$