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Net Monetary Advantage

Mighty Meat Company makes two products from a common input. Joint processing costs up to the split-off point total $64,800 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 $32,400 $32,400 $64,800
Sales value at split-off point $36,000 $36,000 $72,000
Costs of further processing $20,300 $14,300 $34,600
Sales value after further processing $55,400 $53,000 $108,400

Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?

Solution Preview

Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?

If the company sells Product X at the split-off point, the company will have the profit of
36,000 - 32,400 = 3,600

However, if the company further processes Product X, the company will have the profit of
55,400 - (32,400 + 20,300) = 2,700

Therefore, the net monetary ...

Solution Summary

This solution is comprised of solution and calculation to answer what is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point, what is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point, what is the minimum amount the company should accept for Product X if it is to be sold at the split-off point, what is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point.

$2.19