Use incremental analysis for whether to sell or process materials further.

(LO 4) A company manufactures three products using same production process. The costs incurred up to the split-off point are $200,000. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follows.

Product	Number of Units Produced	Selling Price at Split-Off	Selling Price after Processing	Additional Processing Costs
D	3,000	$11.00	$15.00	$14,000
E	6,000	12.00	16.20	16,000
F	2,000	19.40	24.00	9,000

Instructions

a.

Which information is relevant to the decision on whether or not to process the products further? Explain why this information is relevant.

b.

Which product(s) should be processed further and which should be sold at the split-off point?