Question

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?

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,

Let me know if you have any doubts.