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# Dowchow Company: monetary advantage of processing products

Use the following to answer question 89:
Dowchow Company makes two products from a common input. Joint processing costs up to the split-off point total \$38,400 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 \$20,800 \$17,600 \$38,400
Sales value at split-off point \$26,000 \$22,000 \$48,000
Costs of further processing \$22,600 \$20,400 \$43,000
Sales value after further processing \$45,000 \$45,900 \$90,900

89. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
A) \$1,600 C) \$27,600
B) \$22,400 D) (\$3,600)

91. (Ignore income taxes in this problem.) A company with \$800,000 in operating assets is considering the purchase of a machine that costs \$75,000 and which is expected to reduce operating costs by \$20,000 each year. The pay back period for this machine in years is closest to:
A) 0.27 years. C) 3.75 years.
B) 10.7 years. D) 40 years.

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Dowchow Company makes two products from a common input. Joint processing costs up to the split-off point ...

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\$2.19