Question
Technical Chemical manufactures two products as part of a joint process: MB and EB. Joint costs up to the split-off point total $70,000, and are
Technical Chemical manufactures two products as part of a joint process: MB and EB. Joint costs up to the split-off point total $70,000, and are allocated to each line of product in proportion to its relative sales value. At the split-off point, product MB can be sold for $85,000, and EB can be sold for $25,000. At an incremental cost of $30,000, MB can be processed into MB-2 and sold for $105,000. At an incremental cost of $25,000, EB can be processed into EB-2 and sold for $62,500.
a Joint costs allocated to product MB total: $____________
b Joint costs allocated to product EB total: $____________
c The net change in operating income resulting from a decision to manufacture MB-2 is (specify whether the change is an increase or a decrease): $____________
d The net change in operating income resulting from a decision to manufacture EB-2 is (specify whether the change is an increase or a decrease): $____________
e The net change in operating income resulting from a decision to manufacture both MB-2 and EB-2 is (specify whether the change is an increase or a decrease): $____________
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