General Chemical Company (GCC) manufactures two products as part of a joint process: A1 and B1. Joint costs up to the split-off
point total $22,000. The joint costs are allocated to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1 can be sold for $42,000, whereas product B1 can be sold for $63,000. Product A1 can be processed further to make product A2, at an incremental cost of $38,000. A2 can be sold for $85,000. Product B1 can be processed further to make product B2, at an incremental cost of $48,000. B2 can be sold for $95,000. Refer to the information above. The net change in operating income resulting from a decision to manufacture product A2 is:
1 answer:
Answer
The answer and procedures of the exercise are attached in the following archives.
Additional questions:
1. Joint costs allocated to product A1 total
2. Joint costs allocated to product B1 total
3. The net change in operating income resulting from a decision to manufacture product A2 is
4. The net change in operating income resulting from a decision to manufacture product B2 is
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
You might be interested in
Answer:
The capitalized cost will be "784,592".
Explanation:
The given values are:
Initial cost = $500,000
Annual operating cost = $20,000
Interest, i = 12% i.e., 0.12
Effective Two year interest rate, i₂ =
=
As we know,
Now on putting the estimated values in the above expression, we get
⇒
⇒
⇒
So that the above is the right answer.