a) Determine total net income if all products are sold at split-off point. b) Determine total net income if all products are sold after further processing. c) Using incremental analysis determine which products should be sold at split-off point and should be processed further. d) Briefly describe the treatment of Joint Costs when making a sell-or-process-further decisio e) What is the decision rule in deciding whether to sell a product or process it further?
a) Determine total net income if all products are sold at split-off point. b) Determine total net income if all products are sold after further processing. c) Using incremental analysis determine which products should be sold at split-off point and should be processed further. d) Briefly describe the treatment of Joint Costs when making a sell-or-process-further decisio e) What is the decision rule in deciding whether to sell a product or process it further?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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STEP BY STEP EXPLANATION PLEASE.
Transcribed Image Text:Question 1 - Sell / Process Further
Pipeman Inc. has a joint process that produces three separate products: Product A, Product B and
Product C. Each product may be sold at split-off or processed further and then sold. Joint processing
costs for a year amount to $90,000. Other relevant data are as follows:
Product
ABC
Sales Value
at Split-Off
$
60,000
15,000
55,000
Costs after
Split-Off
$
110,000
50,000
125,000
Sales Value
at Completion
$
190,000
35,000
215,000
Required:
a) Determine total net income if all products are sold at split-off point.
b) Determine total net income if all products are sold after further processing.
c) Using incremental analysis determine which products should be sold at split-off point and which
should be processed further.
d) Briefly describe the treatment of Joint Costs when making a sell-or-process-further decision.
e) What is the decision rule in deciding whether to sell a product or process it further?
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Step 1 Apportionment of joint cost to each product at split off point
VIEWStep 2 Calculation of Total income if all products sold at spilt off point
VIEWStep 3 Calculation of Total income if all products sold after further processing
VIEWStep 4 Incremental Analysis
VIEWStep 5 Traetment of joint cost in sell or further process decision
VIEWStep 6 Decision rule to decide whether to sale at split off or further process
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