Question: Faulk Company has a joint process, which produces three products, X, Y, and Z. Each product may be sold at spli-'off or processed further and then sold. Joint processing costs for a year amount to $30,000. Other relevant data are as follows:
Separable
Processing
Sales Value Costs after Sales Value
Product at Split-off Split-off at Completion
X $15,500 $2,200 $17,700
Y 18,000 8,000 23,000
Z 24,000 11,500 37,500
Required to do:
1. What will be the effect on profits of processing each product further?
2. Assume the company maximizes profits, what is Faulk Company's operating income?