Question

XYZ Co. buys raw wool from local sheepherders, separates the wool into two grades—fine and superfine—and then dyes the wool. The company’s joint costs include $50,000 for the raw wool and $6,000 for separating the raw wool into two intermediate products. The undyed fine wool and undyed superfine wool each can be sold at the split-off point for $55,000 and $75,000, respectively. The cost of further processing the undyed fine wool and undyed superfine wool is $20,000 and $30,000, respectively. Furthermore, the sales values of dyed fine wool and dyed superfine wool are $90,000 and $100,000, respectively. Which product should be processed further so that the company can make more profit? A. Undyed superfine wool only B. Undyed fine wool only C. Both undyed fine wool and undyed superfine wool D. Neither undyed fine wool nor undyed superfine wool

Answer 1