Gazzola Ltd produces four joint products A, B, C and D at a total cost
Question:
Gazzola Ltd produces four joint products — A, B, C and D — at a total cost of $325000. The company can sell the products immediately at the split-off point for $100000, $40000, $90000 and $85000 respectively. Alternatively, the products also can be processed further and sold as shown below:
Product | Further processing costs | Sales (excluding GST) | ||
A B C D | $94000 200000 215 000 50 000 | $200000 240 000 290000 140 000 |
Assume that all costs after the split-off point can be avoided for any product that is not processed beyond the split-off point.
Required
Which products should be processed further and which should be sold at the split-off point? Show calculations to justify the decisions.
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett