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    Operating income, processing products further

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    Faulk Company has a joint process, which produces three products, X, Y, and Z. Each product may be sold at spli-'off or processed further and then sold. Joint processing costs for a year amount to $30,000. Other relevant data are as follows:

    Separable
    Processing
    Sales Value Costs after Sales Value
    Product at Split-off Split-off at Completion
    X $15,500 $2,200 $17,700
    Y 18,000 8,000 23,000
    Z 24,000 11,500 37,500

    Required:

    a. What will be the effect on profits of processing each product further?

    b. Assume the company maximizes profits, what is Faulk Company's operating income?

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    Solution Preview

    Faulk Company has a joint process, which produces three products, X, Y, and Z. Each product may be sold at split-off or processed further and then sold. Joint processing costs for a year amount to $30,000. Other relevant data are as follows:

    Separable
    Processing
    ...

    Solution Summary

    Operating income and processing products further are examined.

    $2.19

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