Problem:
Mighty Meat Company makes two products from a common input. Joint processing costs up to the split-off point total $64,800 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs $32,400 $32,400 $64,800
Sales value at split-off point $36,000 $36,000 $72,000
Costs of further processing $20,300 $14,300 $34,600
Sales value after further processing $55,400 $53,000 $108,400
Required to do:
Q1. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
Q2. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
Q3. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
Q4. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?