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
Thank you for using BM.
Below are my answers.
ANSWER: C. Process product J beyond split off and Sell ...
Joint Processing and Split Off Points are assessed.
Split-off point & pay back period
Use the following to answer question 89:
Dowchow Company makes two products from a common input. Joint processing costs up to the split-off point total $38,400 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs $20,800 $17,600 $38,400
Sales value at split-off point $26,000 $22,000 $48,000
Costs of further processing $22,600 $20,400 $43,000
Sales value after further processing $45,000 $45,900 $90,900
89. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
A) $1,600 C) $27,600
B) $22,400 D) ($3,600)
91. (Ignore income taxes in this problem.) A company with $800,000 in operating assets is considering the purchase of a machine that costs $75,000 and which is expected to reduce operating costs by $20,000 each year. The pay back period for this machine in years is closest to:
A) 0.27 years. C) 3.75 years.
B) 10.7 years. D) 40 years.