Question

Process further or sell Benjamin Signal Company produces products R, J, and C from a joint production process. Each product may be sold at the split-off point or be processed further. Joint production costs of $92,000 per year are allocated to the products based on the relative number of units produced Data for Benjamin's operations for the current year are as follows: Sales Value at Split-off $76,000 $71,000 $48,000
Units Produced 8,000 10,000 5,000 Allocated Joint Production Cost $32,000 $40,000 $20,000 Product R... Product J... Product C... Product R can be processed beyond the split-off point for an additional cost of $26,000 and can then be sold for $105,000. Product J can be processed beyond the split-off point for an additional cost of $38,000 and can then be sold for $117,000. Product C can be processed beyond the split-off point for an additional cost of $12,000 and can then be sold for $57,000
Required: Which products should be processed beyond the split-off point?
A. R $3,000 profit
B. J 8,000 profit
C (3,000) loss
So R and J should be processed beyond the split off point. (Show computations)

Answer 1

Answer:

Products R and J should be processed beyond split-off point

Explanation:

In determining whether or not a product should be further processed,the incremental benefit of further processing should be determined as follows:

incremental benefit/(cost)=sales value after split-additional cost of further processing-sales value at split-off point:

Product R =$105,000-$26,000-$76,000=$3,000

Product J=$117,000-$38,000-$71,000=$8,000

Product C=$57,000-$12,000-$48,000=-$3000

Product R and J should be processed  further as they give profit of $3,000 and $8,000 respectively.

Product C should not be further processed as loss of $3,000 would result from that.