Question: Walters Company produces 15,000 pounds of Product A and 30,000 pounds of Product B, each week by incurring a joint cost of $400,000. These two products can be sold as is or processed further. Further processing of either product does not delay the production of subsequent batches of joint product. Data regarding these two products are as follows:
Product A Product B
Selling price per pound without further processing $12.00 $9.00
Selling price per pound with further processing $15.00 $11.00
Total separate weekly variable cost of further processing $50,000 $45,000
Determine the optimal contribution margin per pound of each product and in a total for a week. Why did you handle joint cost the way you did?