Xylon Processing Limited is a chemical manufacturer. Two chemicals, Aardyn and Gargaton, are produced from the common chemical xylon. The joint process requires 15,000 litres of xylon to be processed at a cost of $21,500 (including thecost of the chemical itself). From these 15,000 litres, the company produces 9,600 litres of Aardyn and 5,400 litres of Gargaton. The joint costs of $21,500 are allocated $13,760 to Aardyn and $7,740 to Gargaton. The company can sell the Aardyn and the Gargaton at the split-off point for $15,360 and $8,748, respectively. Alternatively, the company can process the Aardyn further to produce 9,600 litres of Anardyn. The Anardyn sells for $2.38 per litre and additional processing costs are $6,945.
Should Xylon sell Aardyn, or should it process it further to produce Anardyn?

  • CreatedJuly 31, 2015
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