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Joint Processing and Split Off Points

Problem is below. I've come to a conclusion that product J would bring in sales of $636,000 and product K would bring in sales of $1,350,000 which would make me think to sell J at split and continue to process K. What is correct answer?

28. India Corporation has $200,000 of joint processing costs and is studying whether to process J and K beyond the split-off point. Information about J and K follows.

Tons produced: J = 25,000; K = 15,000
Separable variable processing costs beyond split off: J = $64,000; K = $100,000
Selling price per ton at split off: J = $15; K = $52
Selling price per ton after additional processing: J = $21; K = $58

If India desires to maximize total company income, what should the firm do with regard to Products J and K?

A. Sell product J at split off and Sell product K at split off
B. Sell product J at split off and process product K beyond split off
C. Process product J beyond split off and Sell Product K at split off
D. Process product J beyond split off and Process product K beyond split off
E. There is not enough information to judge.

A) Entry A
B) Entry B
C) Entry C
D) Entry D
E) Entry E

Solution Preview

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Below are my answers.

ANSWERS

ANSWER: C. Process product J beyond split off and Sell ...

Solution Summary

Joint Processing and Split Off Points are assessed.

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