Q.3 . Products A, B, and C are produced from a single raw material input. The raw mat-

erial and other production costs up to the split-off point are $100,000, from which

10,000 units of Product A, 15,000 units of Product B, and 10,000 units of Product C

can be produced each period.

At split-off point, selling prices are as follows:

- Product A $2 per unit

- Product B $3 per unit

- Product C $5 per unit.

The Company has been offered the following options:

Further processing costs totals | New selling prices are :

- Product A $25,000 | $4.75 per unit

- Product B $22,500 | $5.00 per unit

- Product C $25,000 | $8.00 per unit.

1. Determine:Which products should be sold at split-off and which should be processed further. Show calculations and explain your reasoning. Be Specific!

Selling Price at Split-Off + [ Incremental Revenue - Incremental Cost ] Net +/-

2. The company has the option to combine Product A and Product C, at an additional

cost of $12,500 to combine both products, and sell the resulting package as a

novelty called AC2 Bundle for $14 per package.

Required: As Management Accountant of this company please recommend :

Should the company produce and sell the AC2 Bundle? What is the minimum

price at which the AC2 Bundle should be sold. Show calculations and explain.