Question

Kirk Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Spock, Uhura, and Sulu. Each of these products can be sold as is, or each can be processed further and sold for a higher price. The company incurs joint costs of $179,700 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product.
Sales Value at Split-Off Point Allocated Joint Costs Cost to Process Further Sales Value of Processed Product
Spock $210,300 $39,100 $110,200 $300,700
Uhura 300,900 60,100 85,900 399,100
Sulu 454,100 80,500 250,900 799,200

Required:
Determine the incremental profit or loss that each of the three joint products.

Answer 1

Answer:

Incremental loss of Spock = $19,800

Incremental profit of Uhura = $12,300

Incremental profit of Sulu = $94,200

Explanation:

Note: See the attached excel for the determination the incremental profit or loss that each of the three joint products.

In the attached excl file, the following formulae are used:

a. Incremental sales value = Sales value of processed product -  Sales value at split off point

b. Incremental profit (loss) = Incremental sales value - Costs to process further

Download xlsx