Question

Zoie makes 2 products from a common input. Each product may be sold at the split-off point or processed further. The following is known about each product: Product 1 Product 2 Allocated joint processing costs 21200 35700 Sales value at split-off point 38100 19200 Costs of further processing 17000 19900 Sales value after further processing 30000 28300 What is the minimum amount the company should accept if Product 1 is sold at the split-off point

Answer 1

Zoie

The minimum amount the company should accept if Product 1 is sold at the split-off point is:

= $30,000.

Step-by-step explanation:

a) Data and Calculations:

Product 1 Product 2

Allocated joint processing costs 21,200 35,700

Sales value at split-off point 38,100 19,200

Costs of further processing 17,000 19,900

Sales value after further processing 30,000 28,300

The minimum amount the company should accept if Product 1 is sold at the split-off point is $30,000.

b) Further processing of Product 1 does not make economic sense. Zoie should sell the product at split-off point at $38,100. Similarly, based on the facts provided, Product 2 hardly deserves further processing.