General Chemical Company (GCC) manufactures two products as part of a joint process: A1 and B1. Joint
Question:
General Chemical Company (GCC) manufactures two products as part of a joint process: A1 and B1. Joint costs up to the split-off point total $22,000. The joint costs are allocated to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1 can be sold for $42,000, whereas product B1 can be sold for $63,000. Product A1 can be processed further to make product A2, at an incremental cost of $38,000. A2 can be sold for $85,000. Product B1 can be processed further to make product B2, at an incremental cost of $48,000. B2 can be sold for $95,000.
1. Joint costs allocated to product A1 total:
a. $8,800.
b. $13,200.
c. $11,000.
d. $22,000.
2. Joint costs allocated to product B1 total:
a. $8,800.
b. $13,200.
c. $11,000.
d. $22,000.
3. The net change in operating income resulting from a decision to manufacture product A2 is:
a. $43,000 (increase).
b. $5,000 (decrease).
c. $5,000 (increase).
d. $38,000 (increase).
4. The net change in operating income resulting from a decision to manufacture product B2 is:
a. $16,000 (increase).
b. $16,000 (decrease).
c. $48,000 (decrease).
d. $32,000 (increase).
Elementary Statistics
ISBN: 978-0538733502
11th edition
Authors: Robert R. Johnson, Patricia J. Kuby