Question

pet products inc. manufactures two products, cat bowls and dog bowls, from a joint process. cat bowls are allocated 50% of the total joint costs of $20,000. there are 1,000 cat bowls produced and 1,000 dog bowls produced each year. cat bowls can be sold at the split-off point for $11 per unit, or they can be processed further into an extra fancy cat bowl for additional processing costs of $4,920 and sold for $14 each. what is the difference in operating income between processing the cat bowls further versus selling them off at the split-off point?

Answer 1

The difference in operating income between processing the cat bowls further versus selling them off at the split-off point is -$1,920.

What is operating income?

Operating income is the adjusted revenue of a business after all operating costs and depreciation have been taken into account. The charges incurred to maintain the operation of the business are known as operating expenses.

Calculating the operational income difference:

After additional processing, sales income (1000*14) 14000

At the split-off point, sales revenue (1000 x 11) 11000

3000 in additional revenue

Cost Incremental -4920

Increased revenue (loss) -1920

Operating income (loss) difference = -1920

The ability of your company to make money from its operational activities is demonstrated by operating income. The operating income figure is frequently used by business owners to assess the operational success of their enterprise. Potential creditors and investors might be interested in your company's operating income.

To learn more about operating income refer to:

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