Question
Rainbow's Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Red, Orange and Yellow. Each
Rainbow's Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Red, Orange and Yellow. Each of these products can be sold as is, or each can be processed further and sold for a higher price. The company incurs joint costs of $300,000 to process one batch of the raw materials that produces the three joint products. The following costs and sales information is available for one batch of each product. Determine whether each of the three joint products should be sold as is, or processed further.
Sales value at split off point Allocated Joint costs Cost to process further Sales value of processed product
Red - $350,000 80,000 $220,000 $530,000
Orange - $450,000 100,000 $250,000 $720,000
Yellow - $550,000 120,000 $280,000 $840,000
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