Wexpro, Incorporated, produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $53,000 per ton, one-fourth of which is allocated to product X15. Eight thousand one hundred units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $17 each, or processed further at a total cost of $7,100 and then sold for $23 each.

Required:

1. What is the financial advantage (disadvantage) of further processing product X15?

2. Should product X15 be processed further or sold at the split-off point?

______________________________________________________________________________________________________________________________________________

Bed & Bath, a retailing company, has two departmentsHardware and Linens. The companys most recent monthly contribution format income statement follows:

	Total	Department
		Hardware	Linens
Sales	$ 4,270,000	$ 3,180,000	$ 1,090,000
Variable expenses	1,276,000	870,000	406,000
Contribution margin	2,994,000	2,310,000	684,000
Fixed expenses	2,240,000	1,380,000	860,000
Net operating income (loss)	$ 754,000	$ 930,000	$ (176,000)

A study indicates that $377,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 14% decrease in the sales of the Hardware Department.

Required:

What is the financial advantage (disadvantage) of discontinuing the Linens Department?