Question

Dock Corporation makes two products from a common input. Joint processing costs up to the split-off point total $33,600 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Product X Product Y Total Allocated joint processing costs $ 16,800 $ 16,800 $ 33,600 Sales value at split-off point $ 24,000 $ 24,000 $ 48,000 Costs of further processing $ 15,000 $ 18,700 $ 33,700 Sales value after further processing $ 35,500 $ 45,100 $ 80,600 What is the financial advantage (disadvantage) for the company of processing Product X beyond the split-off point?

Answer 1

Answer:

The financial disadvantage for the company is 3,500

Explanation:

Computation is Shown Below;

Sales Value at split-off Point = 24000

Subtract: Allocated joint Cost = 16800

Profit if sold at split-off point = 7200

Sales Value after processing = 35500

Subtract: Allocated joint Cost = 16800

Sub: Cost of further processing = 15000

Profit if Processing further = 3700

Financial Disadvantage = 3700 - 7200 = (3500)

Answer 2

Answer: FINANCIAL DISADVANTAGE = $3,500

Explanation:

GIVEN the following;

PRODUCT X:

Allocated joint processing cost = $16,800

Sales Value at split off point = $24,000

Cost of further processing = $15,000

Sales value after further processing = $35,500

PRODUCT Y:

Allocated joint processing cost = $16,800

Sales Value at split off point = $24,000

Cost of further processing = $18,700

Sales Value after further processing = $45,100

The financial advantage or disadvantage is determined by comparing the sale value at split off point to the difference between the selling price after further processing and the cost of further processing of the product

To calculate the financial advantage (disadvantage) of product X :

Sale value of product X at split off point = $24,000

Benefit of further processing = (Sale value of product X after further processing - Cost of further processing product X)

$(35,500 - 15,000) = $20,500

FINANCIAL DISADVANTAGE = ( Sale value at split off > benefit of further processing )

$24,000 - $20,500 = $3500