Question

Your Friend’s Factory produces products X, Y, and Z from a single raw material input. The...

Your Friend’s Factory produces products X, Y, and Z from a single raw material input. The input cost for the single raw material is $120,000. Budgeted data for the next month is as follows:

Product X

Product Y

Product Z

Units produced.................

5,500

5,000

4,500

Per unit sales value at split-off......

$ 19.00

$ 25.00

$ 22.00

Added processing costs per unit....

$ 8.50

$ 7.50

$ 8.00

Per unit sales value if processed further.....

$ 33.00

$ 35.00

$ 29.00


ANSWER EACH QUESTION:

  1. (2 pts) What is the PER UNIT profit (or loss) on each productif it is processed further? SHOW YOUR WORK

    2. (1 pt) Which product or products should be processed further?

Homework Answers

Answer #1

Input cost of single raw material = $120,000

Per unit sales value at split off:

Product- X = $19

Product - Y = $25

Product - Z = $22

Per unit cost value at split off:

Product - X = (120000/15000) = $8

Product - Y = (120000/15000) = $8

Product - Z = (120000/15000) = $8

1.

Particulars Product - X Product - Y Product - Z
Selling price after further process 33 35 29
Selling price at split off 19 25 22
Increased selling price 14 10 7
Further process cost 8.50 7.50 8.00
Profit/loss on further process $5.50 $2.50 ($1)

2. Since there is loss on further processing of product Z by $1 per unit, product -z should not be processed further. Product - X & Y should be processed further.

Thanks,

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