Task Five (Sell or Further Process)

Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $43,200 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:

		Product X	Product Y	Total
	Allocated joint processing costs	$25,600	$17,600	$43,200
	Sales value at split-off point	$32,000	$22,000	$54,000
	Costs of further processing	$15,900	$17,400	$33,300
	Sales value after further processing	$47,500	$40,800	$88,300

Required:

a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?

b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?

c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?

d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?

Task Five (Sell or Further Process)

Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $43,200 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:

		Product X	Product Y	Total
	Allocated joint processing costs	$25,600	$17,600	$43,200
	Sales value at split-off point	$32,000	$22,000	$54,000
	Costs of further processing	$15,900	$17,400	$33,300
	Sales value after further processing	$47,500	$40,800	$88,300

Required:

a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?

b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?

c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?

d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?