Question

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		1,900		2,400		3,400
Per unit sales value at split-off	$	14.00	$	18.00	$	19.00
Added processing costs per unit	$	4.00	$	6.00	$	6.00
Per unit sales value if processed further	$	23.00	$	23.00	$	28.00

The cost of the joint raw material input is $82,000. 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 D

• Choice B

• Choice C

Answer 1

	Product X	Product Y	Product Z
Selling price after further processing	23.00	23.00	28.00
Less: Selling price at the split-off point	14.00	18.00	19.00
Incremental revenue per unit	9.00	5.00	9.00
Less: Additional processing costs per unit	4.00	6.00	6.00
Financial advantage(disadvantage) of further processing	5.00	(1.00)	3.00
	Product X	Product Y	Product Z
Process further	Yes	No	Yes
Choice B Yes, No, Yes is correct