Answer:
Prosperous Production
The minimum amount the company should accept for Product AE if it is to be sold at the split-off point is:
= $ 32,200.
Explanation:
a) Data and Calculations:
Annual joint processing costs up to split-off = $42,300
Product AE Product CJ Total
Allocated joint processing costs $ 25,600 $ 16,700 $ 42,300
Sales value at split-off point $ 32,200 $ 21,500 $ 53,700
Costs of further processing $ 16,700 $ 17,300 $ 34,000
Sales value after further processing $ 48,500 $ 40,200 $ 88,700
b) If the company accepts any amount that is less than the sales value at the split-off point, it will not make enough profit as offered by the market. A further review shows that the company will lose $400 if it processes Product AE further than the split-off point. At the split-off point, it will make a gain of $6,600. After further processing, it will only record a gain of $6,200.
