Question

Wp company produces products x, y, and z from a single raw material input in a joint production process. budgeted data for the next month is as follows: x y z units produced 2,000 2,500 3,500 per unit sales value at split-off $20 $22 $25 added processing costs per unit $5.00 $5.40 $5.00 per unit sales value if processed further $30 $30 $31 the cost of the joint raw material input is $150,000. which of the products should be processed beyond the split-off point?

a) yes yes no
b) yes yes yes
c) yes no yes
d) no no no

Answer 1

After examining the additional revenue and processing costs for each product, it is beneficial for all products X, Y, and Z to be processed further beyond the split-off point. The correct answer is 'b) yes yes yes'.

Step-by-step explanation:

To determine which products should be processed further beyond the split-off point in a joint production process, one must compare the additional revenue from selling the processed product with the additional processing costs. For each product (X, Y, Z), if the increase in sales value minus the added processing cost per unit is positive, it should be processed further. We perform this analysis below:

• Product X: Additional revenue per unit is ($30 - $20) = $10, and added processing cost per unit is $5. The net gain per unit is $10 - $5 = $5. Hence, it is beneficial to process further.
• Product Y: Additional revenue per unit is ($30 - $22) = $8, and added processing cost per unit is $5.40. The net gain per unit is $8 - $5.40 = $2.60. Hence, it is beneficial to process further.
• Product Z: Additional revenue per unit is ($31 - $25) = $6, and added processing cost per unit is $5. The net gain per unit is $6 - $5 = $1. Hence, it is beneficial to process further.

Based on this analysis, the correct answer is 'b) yes yes yes', meaning that products X, Y, and Z should all be processed beyond the split-off point.