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Smith Liquids produces three products by a joint production process. Raw materials are put into production in Department 1, and at the end of processing

Smith Liquids produces three products by a joint production process. Raw materials are put into production in Department 1, and at the end of processing in this department, three products appear. Alpha is sold at the split-off point with no further processing. Beta and Gamma require further processing before they are sold. Beta is prcessed in Department 2, and Gamma is processed in Department 3. Smith Liquids uses the estimated net realizable value method of allocating joint production costs. No inventories were on hand at July 1, the beginning of the quarter. No raw material was on hand at September 30. All units on hand at September 30 were fully complete as to processing. In the next worksheet

Products Alpha Beta Gamma Units Sold 28,000 82,600 98,000 Units on hand at September30 70,000 0 56,000 Sales Revenue $ 126,000 $ 743,000 $ 1,029,000 Departments 1 2 3 Raw material cost $ 470,400 $0 $ 0 Direct labor cost $ 201,600 $ 339,780 $ 805,350 Manufacturing Overhead $ 84,000 $ 88,620 $ 307,65 tab is a summary of costs and other data for the period ended September 30.

A. Assume that the entire output of Alpha could be processed further at an additional cost of $12 per unit and then sold for $16.30 per unit. What would have been the effect on operating profits if all of Alpha output of the quarter had been further processed and then sold rather than being sold at the splitoff point? b . Should Smith Liquids process Alpha further and why?

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