Icy Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 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 22400 19600 42000 Sales value at split-off point 32,000 28,000 60,000 Costs of further processing 11600 25,300 36,900 Sales value after further processing 40,800 54,200 95,000 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?
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Icy Company makes two products from a common input. Joint |
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| Product X | Product Y | Total | |
| Allocated joint processing costs | 22400 | 19600 | 42000 |
| Sales value at split-off point | 32,000 | 28,000 | 60,000 |
| Costs of further processing | 11600 | 25,300 | 36,900 |
Sales value after further processing 40,800 54,200 95,000
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?
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