SELL AT SPLIT OFF POINT OR PROCESS FURTHER & JOINT COST ALLOCATION

Lauricella Inc. produces three products from a common set of inputs for $95,000. Other sales and cost data follow:

Unit Sales Price ____ Costs After

At After further Split-off

Product Quantity Split-off Processing Point__

Regular 8,000 $ 8 $ 10 $ 10,000

Special 5,000 5 8 15,000

Premium 4,000 6 10 20,000

REQUIRED:

1. Which products should be sold at the split-off point?

2. Which products should be processed further?

3. What are Joint Costs?

4. For the purposes of making this decision, should joint costs be allocated? Why or why not?

5. Are there any OTHER reasons why we might want to allocate these costs?