Answer:
Split-off point:
The split-off point is the point at which products from the joint process appear and are identified. The costs which are incurred up to the split-off point are called joint costs and the costs that are incurred after the split-off point are called as
Separable costs. Some joint products which emerge from joint process can be sold at the split-off point or some products can be put to further processing.
Compute the profit or loss from the three products as shown below'
Description A B C
Selling price after further processing 20 13 32
Selling price at the split off point 16 8 25
Incremental revenue per pound or gallon 4 5 7
Total quarterly output in pounds or gallons $15,000 $20,000 $4,000
Total incremental revenue $60,000 $100,000 $28,000
Total incremental processing costs $63,000 $80,000 $36,000
Total incremental profit or (loss) ($3,000) $20,000 ($8,000)
Therefore the products A and C are need to be sold at the split off point and he product B should be processed further to earn good profits.
