The Los Alamos Chemical Company manufactures two products, X1 and X2, from a single input X. During a recent month, 100,000 units of X were processed into 60,000 units of X1 and 40,000 units of unfinished X2 at a cost of $180,000. All units of X2 were completed at an additional cost of $20,000. The unit selling price of X1 and X2 are $2.00 and $3.50, respectively.

Determine the final unit cost of X1 and X2 when joint costs are allocated on the basis of net realizable value (NRV).

1.If X2 can already be sold for $2.64 at the split-off point*, what will be the resulting total operating income (in $) if management decides to sell X2 without further processing? (Note: No changes for the given data of X1.)

2. After comparing the computed total operating income/profits in the previous items, should management sell X2 at the split-off point or after processing it further?

Choices

A. Total operating income will be the same regardless of when to sell X2. Any decision will do.

B. Sell X2 after processing it further.

C.Sell X2 at the split-off point.

3.What is the total operating income (in $) for selling all units produced of X1 and X2?

100,000 units - X1 60,000 units @ $2.00 $180,000 X2 40,000 units @ $3.50 $20,000