Question

WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows: Product X Product Y Product Z Units produced 2,000 2,500 3,500 Per unit sales value at split-off $ 15.00 $ 19.00 $ 20.00 Added processing costs per unit $ 5.00 $ 7.00 $ 7.00 Per unit sales value if processed further $ 24.00 $ 24.00 $ 29.00 The cost of the joint raw material input is $83,000. Which of the products should be processed beyond the split-off point? Product X Product Y Product Z A) yes yes no B) yes no yes C) no yes no D) no yes yes

Answer 1

Answer:

B) yes no yes

Explanation:

Particulars                      Product X                 Product Y                   Product Z

Units Produced                 2,000                        2,500                         3,500

Sales value at split-off        $15                              $19                              $20

Add: Processing cost         $5                                $7                                 $7

Sales after processing        $24                            $24                              $29

Profit after

processing further     $24- $15 - $5          $24 - $19 - $7         $29 - $20 - $7    

                                          = $4                       = - $2                             = $2

                                            Yes                           No                              Yes

Since revenue after split off is from Product X and product Z, Product Y is creating negative profit that is loss from further processing.

Correct option    

B) yes no yes