Assignment:
In a joint processing operation, Nolen Company manufactures three products from a common input. Joint processing costs up to the split-off point total $93,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $55,000; product Y, $90,000; and product Z, $65,000.
Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:
Additional
Product Processing Cost Sales Value
X $ 38,000 $ 83,000
Y $ 38,000 $ 156,000
Z $ 9,000 $ 81,000
Required:
a. Compute the incremental profit (loss) for each product.
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Product X
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Product Y
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Product Z
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Incremental Profit (loss)
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b. Which product or products should be sold at the split-off point?
Product X
Product Y
Product Z
c. Which product or products should be processed further?
Product X
Product Y
Product Z