Agao Chemical Company manufactures three chemicals (NY29, TX38, and CA55) from a joint process. The three chemicals are in industrial grade form at the split-off point. They can either be sold at that point or processed further into premium grade. Costs related to each batch of this chemical process is as follows: NY29 TX38 CA55 Sales value at split-off point P5,000 P16,000 P12,000 Allocated joint costs P6,000 P6,000 P6,000 Sales value after further processing P9,000 P20,000 P18,000 Cost of further processing P2,000 P5,000 P3,000 For which product(s) above would it be more profitable for Agao to sell at the split-off point rather than process further?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Agao Chemical Company manufactures three chemicals (NY29, TX38, and CA55) from a joint process. The three chemicals are in industrial grade form at the split-off point. They can either be sold at that point or processed further into premium grade. Costs related to each batch of this chemical process is as follows:
| NY29 | TX38 | CA55 | |
| Sales value at split-off point | P5,000 | P16,000 | P12,000 |
| Allocated joint costs | P6,000 | P6,000 | P6,000 |
| Sales value after further processing | P9,000 | P20,000 | P18,000 |
| Cost of further processing | P2,000 | P5,000 | P3,000 |
For which product(s) above would it be more profitable for Agao to sell at the split-off point rather than process further?
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