Reference no: EM132418655

Problem: Becky Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $315,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:

Product Selling Price Quarterly

Output

A $13.00per pound  11,600pounds

B $7.00per pound  18,200pounds

C $19.00per gallon  2,800gallons

Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:

Product Additional Selling

Processing Costs Price

A $54,640 $17.40per pound

B $77,580 $12.40per pound

C $29,360 $26.40per gallon

1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?

2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further?