Shynee Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Sarco, Barco, and Larco. Each of these products can be sold as is,r it can be processed further and sold for a higher price. The company incurrs joint costs of n$180,000 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product.
Sales Value at Allocated Cost to Process Sales Value of
Split-off Point Joint Cost Further Processed Product
___________ ___________ __________ ____________
Sarco $200,000 $40,000 $120,000 $300,000
Barco 300,000 60,000 89,000 400,000
Larco 400,000 80,000 250,000 800,000
Determine whether each of the three joint products should be sold as is, or processed further.
In order to make the decision, we need to calculate the incremental profit = incremental revenue - incremental cost
Sarco - Incremental revenue = ...
The solution explains how to decide if products should be sold at split off point or processed further