Answer: Income earned for cups = $1,000
Explanation:
Given:
Materials cost = $40,000
Labor cost = $44,000
Remixing cost amount to $2,000
TSC sold the platters for $100,000 and the cups for $12,000
There will be a decrease in net income due to non-selling of cups
= $12,000 - $2,000
= $10,000.
Thus, the Company's total income will decrease by $10,000 if it stops making and selling cups.
Joint cost allocated to cups
= (40,000 + 44,000)×12,000 ÷ (100,000 + 12,000)
= $9,000
∴
Income earned for cups
= $12,000 - $2,000 - $9,000
= $1,000
