Question

Profit from Processing Further Deaton Corporation manufactures products A, B, and C from a joint process. Joint costs are allocated on the basis of relative sales value of the products at the split-off point. Additional information for Deaton Corporation follows:

	A			B			C			Total
Units produced		13,700			9,700			5,700			29,100
Joint costs	$	161,000		$	77,000		$	90,900		$	328,900
Sales value before additional processing		257,000			117,000			77,000			451,000
Additional costs for further processing		36,500			37,000			29,000			102,500
Sales value if processed further		314,000			154,000			102,300			570,300

Required:

2a. For each of the three products (A, B, and C), calculate the differential benefit (loss) from processing the product after the split-off point rather than selling the product at the split-off point. (Loss amounts should be indicated with a minus sign.)

2b. Which, if any, of products A, B, and C should be processed further and then sold?

• Product A

• Product B

• Product C

• None of the above

• All of the above

Answer 1

Solution: 2a)

Calculation of  differential benefit (loss) from processing the product after the split-off point rather than selling the product at the split-off point

Working:

Solution:2b)

Product A should be processed further as defferential Benifit/loss of product A is Positive.

Therefore option with Product A is the correct Option.