Question

A company manufactures three products using the same production process. The costs incurred up to the split-off point are $201,900. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follows. Product Number of Units Produced Selling Price at Split-Off Selling Price after Processing Additional Processing Costs D 4,540 $10.30 $14.90 $14,824 E 6,410 11.40 15.80 20,554 F 1,750 19.80 22.20 7,520 (b1) Determine the incremental profit (loss) of each product(s). (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Product D Product E Product F Incremental profit (loss) $ $ $ (b2) Which product(s) should be processed further and which should be sold at the split-off point

Answer 1

Answer:

Products D and E should be processed further while product F should be sold at the split off point

Explanation:

Product                                                         D                   E               F    

                                                                      $                    $               $

Sales at the split off point                        10.30               11.40        19.80

Sales after split off point                          14.90              15.80         22.20

Additional sales per unit                          4.6                    4.4            2.4

Units sold(units)                                   ×4540              × 6,410          ×1750

Additional sales revenue                     20,884               28204          4200

Further processing cost                      (14,824)            (20,554)       (7,520)

Incremental income or (loss)                6,060                7,650           (3320 )

Products D and E should be processed further while product F should be sold at the split off point