Question

The Foxmoor Company produces three products, X, Y, and Z, from a single raw material input. Product Y can be sold at the split-off point for total revenues of $63,000 or it can be processed further at a total cost of $36,000 and then sold for $108,000. Product Y:

Multiple Choice
Should be sold at the split-off point, rather than processed further.
Would increase the company's overall net income by $45,000 if processed further and then sold.
Would increase the company's overall net income by $108,000 if processed further and then sold.
Would increase the company's overall net income by $9,000 if processed further and then sold.

Answer 1

Answer: Would increase the company's overall net income by $9,000 if processed further and then sold.

Step-by-step explanation:

The Revenue if sold at the split-off point is $63,000.

But if processed further, we can realize revenue of,

= $108,000 - 36,000

= $72,000

To find out the revenue difference then we will subtract the alternatives.

= $72,000 - 63,000

= $9,000

$9,000 extra will be gained if we process further as opposed to selling at the Split-off point. This shows that Option D or the last option is correct.