Gazzola Ltd produces four joint products — A, B, C

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.

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