Question
Sell at Split-Off or Process Further Bozo Inc. manufactures two products from a joint production process....
Sell at Split-Off or Process Further
Bozo Inc. manufactures two products from a joint production process. The joint process costs $110,000 and yields 6,000 pounds of LTE compound and 14,000 pounds of HS compound. LTE can be sold at split-off for $55 per pound. HS can be sold at split-off for $9 per pound. A buyer of HS asked Bozo to process HS further into CS compound. If HS were processed further, it would cost $44,200 to turn 14,000 pounds of HS into 4,000 pounds of CS. The CS would sell for $43 per pound.
Required:
1. What is the contribution to income from
selling the 14,000 pounds of HS at split-off?
$---------
2. Conceptual Connection: What is the
contribution to income from processing the 14,000 pounds of HS into
4,000 pounds of CS?
$-------------
Should Bozo continue to sell the HS at split-off or process it
further into CS?
--------------------
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