Problem: Shynee Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Sarco, Barco, and Larco. Each of these products can be sold as is, or it can be processed further and sold for a higher price. The company incurs joint costs of $180,000 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product.
|
Sales Value at |
|
Allocated |
|
Cost to Process |
|
Sales Value of |
|
Split-off Point |
|
Joint Costs |
|
Further |
|
Processed Product |
| Sarco |
$200,000 |
|
$40,000 |
|
$120,000 |
|
$300,000 |
| Barco |
300,000 |
|
60,000 |
|
89,000 |
|
400,000 |
| Larco |
400,000 |
|
80,000 |
|
250,000 |
|
800,000 |
Instructions:
Determine whether each of the three joint products should be sold as is, or processed further.