Question

Farrugia Corporation produces two intermediate products, A and B, from a common input. Intermediate product A can be further processed into end product X. Intermediate product B can be further processed into end product Y. The common input is purchased in batches that cost $36 each and the cost of processing a batch to produce intermediate products A and B is $15. Intermediate product A can be sold as is for $21 or processed further for $14 to make end product X that is sold for $32. Intermediate product B can be sold as is for $44 or processed further for $28 to make end product Y that is sold for $64. Required: a. Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of the common input into the end products X and Y

Answer 1

Answer:

Farrugia Corporation

a. The amount made from processing one batch of the common input into the end products X and Y:

$2 ($95 - $93)

Explanation:

a) Data and Calculations:

Intermediate products = A and B

Intermediate product A processed into end product X

Intermediate product B processed into end product Y.

Cost of purchase of common input = $36

Cost of processing a batch to produce intermediate products A and B = $15

Further processing of product A into X will cost = $14

Further processing of product B into Y will cost $28

Sales price of X = $32

Sales price of Y = $64

Total price for X and Y = $95

Total cost for X and Y:

Purchase of a batch =             $36

Cost of batch processing =       15

Cost of further processing A:   14

Cost of further processing B:  28

Total cost =                             $93

The company makes $2 ($95 - $93) from processing one batch of the common input into the end products X and Y.