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Exercise 13-6 Sell or Process Further [LO6]

Exercise 13-6 Sell or Process Further [LO6]

Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $104,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $59,000; product Y, $94,000; and product Z, $65,000.

Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Product Additional
Processing Cost Sales
Value
X $ 46,000 $ 88,000
Y $ 35,000 $ 160,000
Z $ 12,000 $ 82,600
________________________________________

Required:
(a) Compute the incremental profit (loss) for each product. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

Product X Product Y Product Z
Incremental profit (loss) $
$
$

________________________________________

(b) Which product or products be sold at split-off point?

Product X

Product Y

Product Z

(c) Which product or products should be processed further? (Select all that apply.)

Product X

Product Y

Product Z

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Exercise 13-6 Sell or Process Further [LO6]

Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $104,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $59,000; product Y, $94,000; and product Z, $65,000.

Each product may be sold at ...

Solution Summary

The solution explains how to decide if a product should be sold at split-off point or processed further for Solex Company with calculations.

$2.19