Question

Bodbbm177 Corporation makes two products, Light and Heavy. These two products emerge from a joint process. Product Light has been allocated $34,300 of the total joint costs of $55,000. A total of 2,900 units of product Light are produced from the joint process. (ID#67143) Product Light can be sold at the split-off point for $11 per unit, or it can be processed further for an additional total cost of $10,900 and then sold for $13 per unit. Q) If product Light is processed further and sold, what would be the financial advantage (disadvantage) for Bodbbm177 Corporation compared with sale in its unprocessed form directly after the split-off point?

Answer 1

in both cases, product light is not profitable, but processing further increases the losses by $7,500 - $2,400 = $5,100

Step-by-step explanation:

total joint costs $55,000

• light = $34,300
• heavy = $20,700

2,900 units of light are produced, so cost per unit = $34,300 / 2,900 = $11.8276 per unit

if product light is sold at $11 per unit at the split-off point, it will yield a $2,400 loss

if further processed, total costs of product light = $34,300 + $10,900 = $45,200. Cost per unit = $45,200 / 2,900 = $15.5862

if product light is sold at $13 per unit after further processing, it will yield a $7,500 loss

in both cases, product light is not profitable, but processing further increases the losses by $7,500 - $2,400 = $5,100