Question

TB MC Qu. 11-96 WP Corporation produces products X, Y, and Z ...

WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows:

	Product X		Product Y		Product Z
Units produced		2,100		2,600		3,600
Per unit sales value at split-off	$	19.00	$	25.00	$	21.00
Added processing costs per unit	$	2.00	$	4.00	$	4.00
Per unit sales value if processed further	$	26.00	$	26.00	$	31.00

The cost of the joint raw material input is $74,000. Which of the products should be processed beyond the split-off point?

	Product X	Product Y	Product Z
A)	yes	yes	no
B)	yes	no	yes
C)	no	yes	no
D)	no	yes	yes

Multiple Choice

• Choice A

• Choice B

• Choice C

Answer 1

	Product X	Product Y	Product Z
Selling price after further processing	26.00	26.00	31.00
Less: Selling price at the split-off point	19.00	25.00	21.00
Incremental revenue per unit	7.00	1.00	10.00
Less: Total incremental processing costs per unit	2.00	4.00	4.00
Financial advantage(disadvantage) of further processing	5.00	-3.00	6.00
Product X and Z should be processed further
Product Y should be sold at the split-off point
Choice B Yes No Yes is correct