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# Sold at split off point or processed further

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Wallace Company produces two products from a common input. Data relating to the two products are given below:

Product A Product B
Sales value at the split off point.... \$60,000 \$120,000
Allocated joint product costs... \$45,000 \$90,000
Sales value after further processing... \$90,000 \$200,000
Cost of further processing... \$20,000 \$85,000

Determine which of the products should be sold at the split off point, and which should be processed further before sale. Use the form that appears below.

Product A Product B
Sales value after further processing... \$________ \$________
Sales value at the split off point... _________ _________
Incremental revenue from further processing... _________ _________
Less cost of further processing... _________ _________
Profit (loss) from further processing... \$________ \$________

#### Solution Preview

Product A Product B
Sales value after further processing... 90,000 200,000
Sales value at ...

#### Solution Summary

The solution explains how to determine whether the products should be sold at split off point or processed further

\$2.19

## Exercise 13-6 Sell or Process Further [LO6]

Exercise 13-6 Sell or Process Further [LO6]

Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total \$104,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, \$59,000; product Y, \$94,000; and product Z, \$65,000.

Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Processing Cost Sales
Value
X \$ 46,000 \$ 88,000
Y \$ 35,000 \$ 160,000
Z \$ 12,000 \$ 82,600
________________________________________

Required:
(a) Compute the incremental profit (loss) for each product. (Negative amount should be indicated by a minus sign. Omit the "\$" sign in your response.)

Product X Product Y Product Z
Incremental profit (loss) \$
\$
\$

________________________________________

(b) Which product or products be sold at split-off point?

Product X

Product Y

Product Z

(c) Which product or products should be processed further? (Select all that apply.)

Product X

Product Y

Product Z

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