Bozo Inc manufactures two products from a joint production process
Bozo Inc. manufactures two products from a joint production process. The joint process costs $ 110,000 and yields 6,000 pounds of LTE compound and 20,000 pounds of HS compound. LTE can be sold at split-off for $ 55 per pound. HS can be sold at split-off for $ 8 per pound. A buyer of HS asked Bozo to process HS further into CS compound. If HS were processed further, it would cost $ 34,000 to turn 20,000 pounds of HS into 4,000 pounds of CS. The CS would sell for $ 45 per pound.
Required:
1. What is the contribution to income from selling the 20,000 pounds of HS at split-off?
2. What is the contribution to income from processing the 20,000 pounds of HS into 4,000 pounds of CS? Should Bozo continue to sell the HS at split-off or process it further into CS?
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