Question

WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows: Product XProduct YProduct ZUnits produced 1,400 1,900 2,900Per unit sales value at split-off$12.00$17.00$14.00Added processing costs per unit$3.00$5.00$5.00Per unit sales value if processed further$18.00$18.00$23.00 The cost of the joint raw material input is $67,000. Which of the products should be processed beyond the split-off point

Answer 1

Answer:

Product X and Z can be further processed

Explanation:

Financial advantage (disadvantage) to determine which product to be sold at split off and which is to be further processed - WP Corporation

Particulars                    Product X           Product Y       Product Z

Selling price after             $18.00               $18.00         $23.00

further processing

Selling price at split          $12.00               $17.00          $14.00

off point  

Increment revenue             $6.00                $1.00           $9.00

per pound or gallon

Total quarterly output          1400                  1900            2900

in pound or gallon

Total Incremental               $8,400.00      $1,900.00  $26,100.00

revenue

Total incremental              $4,200.00       $9,500.00      $14,500.00

processing cost

Financial advantage          $4,200.00    -$7,600.00    $11,600.00

(disadvantage) of further

processing

Process Further?                   Yes                  No                Yes

Therefore product X and Z can be further processed