Question

Two products, QI and VH, emerge from a joint process. Product QI has been allocated $18,300 of the total joint costs of $39,000. A total of 2,500 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $14 per unit, or it can be processed further for an additional total cost of $10,500 and then sold for $16 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point?

Answer 1

Answer:

It is a disadvantage to continue processing QI. The lost on profit is= $5500

Explanation:

Product QI has been allocated $18,300 of the total joint costs of $39,000.

A total of 2,500 units of product QI are produced.

Product QI can be sold at the split-off point for $14 per unit.

It can be processed further for an additional total cost of $10,500 and then sold for $16 per unit.

Split-off point:

Sales= 2500q*$14=$35000

Total cost=$18300

Profit=$16700

Post-split-off:

Sales=2500*16=$40000

Cost previous split-off=$18300

Added cost= $10500

Profit=$11200

Comparing profits (16700>11200) it is not beneficial to continue processing QI products.