Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $43,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total Allocated joint processing costs $ 25,800 $ 17,200 $ 43,000 Sales value at split-off point $ 30,000 $ 20,000 $ 50,000 Costs of further processing $ 23,800 $ 18,100 $ 41,900 Sales value after further processing $ 47,000 $ 57,500 $ 104,500
Required:
a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.)
b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?
Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $43,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
| Product X | Product Y | Total | ||||||||
| Allocated joint processing costs | $ | 25,800 | $ | 17,200 | $ | 43,000 | ||||
| Sales value at split-off point | $ | 30,000 | $ | 20,000 | $ | 50,000 | ||||
| Costs of further processing | $ | 23,800 | $ | 18,100 | $ | 41,900 | ||||
| Sales value after further processing | $ | 47,000 | $ | 57,500 | $ | 104,500 | ||||
Required:
a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.)
b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?
Related questions
Iaukea Company makes two products from a common input. Jointprocessing costs up to the split-off point total $51,300 a year.The company allocates these costs to the joint products on thebasis of their total sales values at the split-off point. Eachproduct may be sold at the split-off point or processed further.Data concerning these products appear below:
| Product X | Product Y | Total | ||||
| Allocated joint processing costs | $ | 20,000 | $ | 31,300 | $ | 51,300 |
| Sales value at split-off point | $ | 24,400 | $ | 38,400 | $ | 62,800 |
| Costs of further processing | $ | 24,500 | $ | 18,800 | $ | 43,300 |
| Sales value after further processing | $ | 48,400 | $ | 58,900 | $ | 107,300 |
A) What is the net monetary advantage (disadvantage) ofprocessing Product X beyond the split-off point?
| B) What is the net monetary advantage (disadvantage) ofprocessing Product Y beyond the split-off point? C) What is the minimum amount the company should accept forProduct X if it is to be sold at the split-off point?
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Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $335,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:
| Product | Selling Price | Quarterly Output | ||||
| A | $ | 17.00 | per pound | 12,400 | pounds | |
| B | $ | 11.00 | per pound | 19,400 | pounds | |
| C | $ | 23.00 | per gallon | 3,600 | gallons | |
Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:
| Product | Additional Processing Costs | Selling Price | |||
| A | $ | 63,720 | $ | 21.80 | per pound |
| B | $ | 91,120 | $ | 16.80 | per pound |
| C | $ | 37,360 | $ | 30.80 | per gallon |
Required:
1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further?
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $305,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:
| Product | Selling Price | Quarterly Output | ||||
| A | $ | 11.00 | per pound | 11,200 | pounds | |
| B | $ | 5.00 | per pound | 17,600 | pounds | |
| C | $ | 17.00 | per gallon | 2,400 | gallons | |
Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:
| Product | Additional Processing Costs | Selling Price | |||
| A | $ | 50,340 | $ | 15.20 | per pound |
| B | $ | 71,170 | $ | 10.20 | per pound |
| C | $ | 25,600 | $ | 24.20 | per gallon |
Required:
1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further?
