Question

Served Inc. Manufactures two​ products, salad plates and​ platters, from a joint process. Salad plates are allocated​ $7,900 of the total joint costs of​ $26,000. There are​ 3,500 salad plates produced and​ 3,500 platters produced each year. Salad plates can be sold at the splitminusoff point for​ $10 per​ unit, or they can be hand painted for additional processing costs of​ $8,600 and sold for​ $19 for each deluxe salad plate. If the salad plates are processed further and made into deluxe​ plates, the effect on operating income would be A. ​$22,900 net decrease in operating income. B. ​$35,000 net increase in operating income. C. ​$35,000 net decrease in operating income. D. ​$22,900 net increase in operating income.

Answer 1

Option D is correct,​$22,900 net increase in operating income.

Explanation:

The formula for determining the effects of the salad plates being processed further is giving below:

increase/decrease in net income=sales value when processed further-sales value if sold at split-off point-the costs of further processing.

sales value when further processed=$19*3500=$ 66,500.00

sales value at split-off point=$10*3500=$35,000

additional costs of further processing =$8600

increase/(decrease) in operating income=$ 66,500.00-$35,000.00-$8,600.00=$ 22,900.00

The correct option is $ 22,900.00 net increase in operating income