Answered: 1) Incremental revenue from further…

1) Incremental revenue from further processing 2) Incremental cost of further processing 3) Financial impact of further processing 4) Should Land O'Lakes Sell "as is" or process further?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Land O'Lakes' is considering processing its half & half into two additional products - flavored half & half
and pudding cups. A batch of each product uses one-half gallon of half & half. Cost data related to
each batch of these products is provided below.
Sales Value at split-off
Sales Value after further processing
Allocated joint costs
Cost of further processing
1) Incremental revenue from further processing
2) Incremental cost of further processing
3) Financial impact of further processing
4) Should Land O'Lakes Sell "as is" or process further?
FLAVORED HALF &
$3.75
$5.00
$1.00
$0.50
HALF
$3.75
$6.00
$1.00
$3.00
PUDDING

PRE
Land O'Lakes
Units Produced, Demanded, & Sold:
Sales Price per Unit
Product Cost per Unit:
Direct Material
Direct Labor
Allocated Overhead
Total per unit product cost
Activity Used
Wages & Salaries
Butter
400,000
$5.35
$0.85
$1.31
$0.33
$2.48
Butter
32,000
Half & Half
325,000
$3.75
$0.95
$1.96
$0.49
$3.40
Half & Half
39,000
*Note that all manufacturing overhead is fixed costs
Total
Cost Driver
71,000 Direct Labor Hours

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