Answer:
a) Product G should be produced and sold
b) Net financial advantage $80
Explanation:
<em>A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost. </em>
<em>Also note that all cost incurred up to the split-off point are irrelevant to the decision to process further . </em>
$
Revenue after split-off point
($9× 40 litres) 360
Revenue at the slit of point
($4 × 40) <u> (160)</u>
Additional income from further processing 200
Further processing cost ($3× 40) <u>(120)</u>
Incremental income from further processing <u> 80</u>
Incremental income from further processing = $80
a) The product F should be processed further and sold as product G. Doing so would increase the net income by $80.
b) Net advantage $80