Winnovia Mills processes cotton in a joint process that yields two joint products: fabric and yarn. May's joint cost is $120,000, and the sales values at split-off are $360,000 for fabric and $300,000 for yarn. If the products are processed beyond split-off, the final sales value will be $540,000 for fabric and $420,000 for yarn. Additional costs of processing are expected to be $120,000 for fabric and $102,000 for yarn.
a. Should the products be processed further?
Show computations.
- Fabric Yarn
- Final revenues $ $
- Revenues at split-off $ $
- Incremental revenues $ $
- Incremental costs $ $
- Net benefit (cost) of further processing $ $