Question

Two products, QI and VH, emerge from a joint process. Product QI has been allocated $20,300 of the total joint costs of $41,000. A total of 2,700 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $12 per unit, or it can be processed further for an additional total cost of $10,700 and then sold for $14 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

($5,300)

Step-by-step explanation:

Calculation to determine what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point

QI and VH

Sales value after further processing $37,800

($14 × 2,700)

Less Costs of further processing ($10,700)

Benefit of further processing $27,100

($37,800- $10,700)

Less: Sales value at split-off point ($32,400)

($12 × 2,700)

Net advantage (disadvantage) ($5,300)

($27,100+$32,400)

Therefore 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 is $(5,300)