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Joint product

Please see attached document.

Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100,000 per year. The company allocates these costs to the joint products on the basis of their total sales value of the split-off point. These sales values are as follows: Product X, $50,000; product Y, $90,000; and product Z, $60,000.

Each product may be sold at the split-off point or processes further. Additional processing for each product (on an annual basis) are shown below:

Product Additional Processing Costs Sales Value
X $35,000 $80,000
Y $40,000 $150,000
Z $12,000 $75,000

Which product or products should be sold at the split-off point, and which product or products should be processed further? Show computations.


Solution Summary

Excel file shows profit at split off point and after processing further.