A joint production process at Sunny Side Up results in two products, grape jelly and grape jam. The following cost and activity data relate to these two products: Grape Jelly Grape Jam Joint costs allocated $ 10,000 $ 12,000 Number of units produced from joint process 2,000 2,000 Selling price at split-off point $ 2.50 $ 1.75 Selling price after processing further $ 5.00 $ 2.00 Cost of processing further $ 2,200 $ 2,000 Grape jelly can be sold as-is (at the split-off point) for $2.50 per unit, or it can be processed further into a specialty grape smoothie and then sold for $5.00 per unit. If grape jelly is processed further into the specialty grape smoothie, what would be the overall effect on operating income? Select one: a. $3,500 net decrease in operating income b. $2,800 net decrease in operating income c. $2,800 net increase in operating income d. $5,000 net increase in operating income e. $5,000 net decrease in operating income f. $3,500 net increase in operating income
A joint production process at Sunny Side Up results in two products, grape jelly and grape jam. The following cost and activity data relate to these two products: Grape Jelly Grape Jam Joint costs allocated $ 10,000 $ 12,000 Number of units produced from joint process 2,000 2,000 Selling price at split-off point $ 2.50 $ 1.75 Selling price after processing further $ 5.00 $ 2.00 Cost of processing further $ 2,200 $ 2,000 Grape jelly can be sold as-is (at the split-off point) for $2.50 per unit, or it can be processed further into a specialty grape smoothie and then sold for $5.00 per unit. If grape jelly is processed further into the specialty grape smoothie, what would be the overall effect on operating income? Select one: a. $3,500 net decrease in operating income b. $2,800 net decrease in operating income c. $2,800 net increase in operating income d. $5,000 net increase in operating income e. $5,000 net decrease in operating income f. $3,500 net increase in operating income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A joint production process at Sunny Side Up results in two products, grape jelly and grape jam. The following cost and activity data relate to these two products:
|
|
Grape Jelly |
Grape Jam |
|
Joint costs allocated |
$ 10,000 |
$ 12,000 |
|
|
||
|
Number of units produced from joint process |
2,000 |
2,000 |
|
|
|
|
|
Selling price at split-off point |
$ 2.50 |
$ 1.75 |
|
Selling price after processing further |
$ 5.00 |
$ 2.00 |
|
|
|
|
|
Cost of processing further |
$ 2,200 |
$ 2,000 |
Grape jelly can be sold as-is (at the split-off point) for $2.50 per unit, or it can be processed further into a specialty grape smoothie and then sold for $5.00 per unit.
If grape jelly is processed further into the specialty grape smoothie, what would be the overall effect on operating income?
Select one:
a. $3,500 net decrease in operating income
b. $2,800 net decrease in operating income
c. $2,800 net increase in operating income
d. $5,000 net increase in operating income
e. $5,000 net decrease in operating income
f. $3,500 net increase in operating income
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