Compumeds Company manufactures products A and B from a joint process. Product A has been allocated $2,500 of the $20,000 in total joint costs associated with the production of 1,000 units each of A and B each year. A can be sold at the split-off point for #3 per unit, or it can be processed further with additional costs of $1,000 and sold for $5 per unit. If A is processed further and sold, the result would be:
a) An additional gain of $2,000 from further processing
b) A break even situation
c) An additional gain of $1000 from further processing
d) A loss of $1000 from further processing
This solution calculates the additional costs when products A and B are manufactured from a joint process.