Problem:
Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100,000 per year. The company allocates these costs to the joint products on the basis of their total sales value of the split-off point. These sales values are as follows: Product X, $50,000; product Y, $90,000; and product Z, $60,000.
Each product may be sold at the split-off point or processes further. Additional processing for each product (on an annual basis) are shown below:
|
Product
|
Additional Processing Costs
|
Sales Value
|
|
X
|
$35,000
|
$80,000
|
|
Y
|
$40,000
|
$150,000
|
|
Z
|
$12,000
|
$75,000
|
Which product or products should be sold at the split-off point, and which product or products should be processed further? Show computations.