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Processing Decision

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Express Company incurs $200,000 of joint product costs to produce three plant growth products: 40,000 pounds of GrowK; 35,000 of GrowL; and 25,000 of GrowG. The 3 products can be sold at split-off or processed further into GrowK Super, GrowL Super and GrowG Super. Determine which products should be sold at split off point and which should be processed further based on the following:

Product;Unit Selling Price;Total Cost to Process Further;Product; Unit Selling Price
GrowK;$2.00;30,000;GrowK Super;$2.90
GrowL;$3.00;$42,000;GrowL Super;$4.50
GrowG;$4.00;$50,000;GrowG Super;$5.60

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Solution Summary

This solution calculated whether products should be sold at the split off point or further processed.

Solution Preview

A product should be processed further if the additional revenue from further processing is greater than the additional cost required for further processing. The joint product cost ($200,000) does not impact this decision.

Further processing ...

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