Question

Two of Interpret Inc's products, QI and VH, emerge from a joint process. Product QI has been allocated $15,300 of the total joint costs of $36,000. A total of 2,200 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $10 per unit, or it can be processed further for an additional total cost of $10,200 and then sold for $12 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point

Answer 1

($5,800)

Step-by-step explanation:

Calculation to determine what would be the financial advantage (disadvantage) for the company

Product QI

Sales value after further processing $26,400

($12 × 2,200)

Less Costs of further processing ($10,200)

Benefit of further processing $16,200

($26,400-$10,200)

Less Sales value at split-off point ($22,000)

($10 × 2,200)

Net advantage (disadvantage) ($5,800)

($16,200-$22,000)

Therefore what would be the financial advantage (disadvantage) for the company is ($5,800)