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Products A, B, and C are produced from a single raw material input

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Products A, B, and C are produced from a single raw material input. The Raw material costs $90,000 from which 5,000 units of A, 10,000 units from B, and 15,000 units of C can be produced each period. Product A can be sold at the split off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. Product A should Be:

A) Sold at the split off point, since further processing would result in a loss of $0.50 per unit
B) Processed further, since this will increase profits by $2500 each period
C) Sold at the split off point, since further processing will result in a loss of $2500 each period
D) Processed further, since this will increase profits by $12,500 each period

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Products A, B, and C are produced from a single raw material input. The Raw material costs $90,000 from which 5,000 units of A, 10,000 units from B, and 15,000 units of C can be produced each period. Product A can be sold at the split off ...

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Manal Elkhoshkhany, MBA
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  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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