Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $42,500 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs $ 17,000 $ 25,500 $ 42,500
Sales value at split-off point $ 20,000 $ 30,000 $ 50,000
Costs of further processing $ 22,900 $ 17,200 $ 40,100
Sales value after further processing $ 38,000 $ 55,700 $ 93,700
Required:
a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?
b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?
Answers: 1
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