Question - A joint production process at Happy Days Farm results in two products; blackberry syrup and blackberry jam. The following cost and activity data relate to these two products:
Joint costs allocated: Syrup-$10,000, Jam-$12,000
Number of units produced from joint process: Syrup-1,500, Jam-1,500
Selling price at split-off point: Syrup-$2.50, Jam-$1.75
Selling price after processing further: Syrup-$5.00, Jam-$2.00
Cost of processing further: Syrup-$2,000, Jam-$2,000
Blackberry syrup can be sold as-is (at the split-off point) for $2.50 per unit, or it can be processed further into a specialty blackberry juice and then sold for $5.00 per unit. If blackberry syrup is processed further into the specialty blackberry juice, what would be the overall effect on operating income?
A) $1,750 net decrease in operating income
B) $3,750 net increase in operating income
C) $1,750 net increase in operating income
D) $3,750 decrease in operating income