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 X Product Y Product Z Units produced 1,600 2,100 3,100 Per unit sales value at split-off $ 14.00 $ 19.00 $ 16.00 Added processing costs per unit $ 5.00 $ 7.00 $ 7.00 Per unit sales value if processed further $ 20.00 $ 20.00 $ 25.00 The cost of the joint raw material input is $69,000. Which of the products should be processed beyond the split-off point? Product X Product Y Product Z A) yes yes no B) yes no yes C) no yes no D) no yes yes

Answer 1

Answer:

B) yes no yes

Explanation:

The preparation is shown below:

Particulars Product X Product Y Product Z

Units produced 1,600           2,100         3,100

Sales Value at split off per unit $14 $19 $16

Total Sales Value at split off   (a) $22,400 $39,900 $49,600

Units produced 1,600 2,100 3,100    (X)

Sales Value per unit $20 $20 $25

Additional Processing cost per unit $5 $7 $7

Net Realizable Value = Sales value - Further costs $15 $13 $18 (y)

Total Realizable Value if processed further (b) $24,000 $27,300 $55,800   (x × Y)

Difference = b- a $1,600 -$12,600          $6,200

Processed further Yes            No               Yes

As the product X and product Z contains positive number so it should be processed and Product Y should not be processed as it contains negative number