Question

A company manufactures three products using the same production process. The costs incurred up to the split-off point are $201,900. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follows. Product Number of Units Produced Selling Price at Split-Off Selling Price after Processing Additional Processing Costs D 4,540 $10.30 $14.90 $14,824 E 6,410 11.40 15.80 20,554 F 1,750 19.80 22.20 7,520 (b1) Determine the incremental profit (loss) of each product(s). (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Product D Product E Product F Incremental profit (loss) $ $ $ (b2) Which product(s) should be processed further and which should be sold at the split-off point

Answer 1

Products D and E should be processed further while product F should be sold at the split off point

Step-by-step explanation:

Product D E F

$ $ $

Sales at the split off point 10.30 11.40 19.80

Sales after split off point 14.90 15.80 22.20

Additional sales per unit 4.6 4.4 2.4

Units sold(units) ×4540 × 6,410 ×1750

Additional sales revenue 20,884 28204 4200

Further processing cost (14,824) (20,554) (7,520)

Incremental income or (loss) 6,060 7,650 (3320 )

Products D and E should be processed further while product F should be sold at the split off point