Answer:
Increase in net income from further processing $ 252,000.
Explanation:
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>Additional sales revenue = Sales revenue after further processing - sales revenue after split-off point</em>
Note that the cost already incurred up to split-off point is a sunk cost which is irrelevant for the further processing decision.
$
<em>Sales revenue after split off point</em>
(11,200× 70) + (5,600× 105) = 1,372,000
<em>Sales revenue at the split off point </em> <u>( 700,000)</u>
Additional sales revenue 672,000.
Less further processing cost <u> (420,000)</u>
Increase in net income from further processing <u>252,000.</u>