Question

Bowen Company makes two products from a joint production process. Each product may be sold at...

Bowen Company makes two products from a joint production process. Each product
may be sold at the split-off point or processed further. Information concerning
these products for last year appears below:

                                              Product X      Product Y
Allocated joint costs ....................     $25,000        $17,000
Sales value after further processing .....     $47,000        $41,000
Sales value at the split-off point .......     $29,000        $23,000
Additional processing costs ..............     $19,000        $15,000

Assume Bowen Company makes all the correct sell or process further decisions.

Calculate the net income reported by Bowen Company last year.
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Answer #1

Decision analysis :

Product X Product Y
Sale after further processingg 47000 41000
Sale at split off point 29000 23000
Incremental revenue 18000 18000
Additional processing cost 19000 15000
Incremental profit (loss) -1000 3000
Decision not process further Process further

Calculate net income :

Product X Product Y
Sale 29000 41000
Less: Joint cost -25000 -17000
Less: Additioonal process cost 0 -15000
Net income 4000 9000

Total net income reported by bowen company is $13000

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