Style Company manufactures three items, S1, S2, and S3, which are used in the production of fabrics. Each item can be sold at the point that all three are separated from the joint production process, or they can be processed further. Presently, S1 and S2 are processed past the point of separation. The joint cost of producing the three items to the point of separation is $450,000. The costs past the point of separation are variable and can be traced to each product. The $450,000 joint costs are allocated to each product equally.

The following information is available:

Required:
1. Should S1 and S2 be processed after the separation point?
2. What maximum additional processing costs could be incurred to process S3 further and still leave aprofit?

Transcribed Image Text:

Selling Price per Unit at Point of Separation $10 Selling Price per Unit After Processing Number Additional Processing of Units Produced Costs s1 100,000 40,000 $12 11 S120,000 S2 ? 11 60,000 13