Making decision based on process costing.
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 at 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 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
|
Sales
|
|
Product
|
Processing Costs
|
Value
|
|
X
|
$35,000
|
$80,000
|
|
Y
|
$40,000
|
$150,000
|
|
Z
|
$12,000
|
$75,000
|
Required: Which product or products should be sold at the splot-off point, and which product or products should be processed further? Show computations.