Question
Product Number of Units Produced Selling Price at Split-Off Selling Price After Processing Additional Processing Costs tables 4500 $11.00 $15.50 $11,000 benches 6000 $14.00 $16.20
Product | Number of Units Produced | Selling Price at Split-Off | Selling Price After Processing | Additional Processing Costs |
tables | 4500 | $11.00 | $15.50 | $11,000 |
benches | 6000 | $14.00 | $16.20 | $16,500 |
planters | 1500 | $18.50 | $26.00 | $8,000 |
Superior Company manufactures three products using the same production process: tables, benches, and planters. The costs incurred up to the split-off point are $250,000. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per units at each point in production, and the additional processing costs are as follows:
1) Which information is not relevant to the decision on whether or not to process the products further (1 pt)?
2) Prepare an incremental analysis (with labels!) of the three products (6 pts).
3) Which products should be processed further and which should be sold at the split-off point (2 pts)?
4) Would your decision in #3 be different if the company was using quantity of output to allocate joint costs? Explain (1 pt).
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