Question

A joint production process at Berry Lane Farm results in two​ products, blackberry syrup and blackberry jam. The following cost and activity data relate to these two​ products: Blackberry syrup Blackberry jam Joint costs allocated ​$10,000 ​$12,000 Number of units produced from joint process Selling price at splitoff point ​$1.75 Selling price after processing further ​$2.00 Cost of processing further Blackberry syrup can be sold asis ​(at the splitoff ​point) for per​ unit, or it can be processed further into a specialty blackberry juice and then sold for per unit. If blackberry syrup is processed further into the specialty blackberry​ juice, what would be the overall effect on operating​ income?

Answer 1

Answer: C. $ 2,750 net increase in operating income

Explanation:

Income if Blackberry syrup is sold as is;

= Sales price * No. of units

= 2.90 * 1,900

= $5,510

Income if Blackberry Syrup is processed further;

= (Sales price * No. of units) - Processing costs

= ( 5.4 * 1,900) - 2,000

= 10,260 - 2,000

= $8,260

Difference;

= 8,260 - 5,510

= $2,750