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Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of

Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split-off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows.

Sales Value and Additional Costs If Processed Further

Product

Pounds Produced

Sales Value at Split-Off

Final Sales Value

Additional Cost

Sea Tea

9,000

$

60,000

$

90,000

$

35,000

Sea Paste

4,000

80,000

160,000

50,000

Sea Powder

2,000

70,000

85,000

14,000

Required:

a-1.Compute the incremental benefit (cost) of further processing to these products.

a-2.Which products should Kelp process beyond the split-off point?

b.What is the selling price per pound of Sea Paste at the split-off point at which the company is indifferent?

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