Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split-off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows. Sales Value and Additional Costs If Processed Further Product Pounds Produced Sales Value at Split-Off Final Sales Value Additional Cost Sea Tea 9,000 $ 60,000 $ 90,000 $ 35,000 Sea Paste 5,300 86,900 160,000 50,000 Sea Powder 2,000 70,000 85,000 14,000 Required: a-1. Compute the incremental benefit (cost) of further processing to these products. a-2. Which products should Kelp process beyond the split-off point? b. What is the selling price per pound of Sea Paste at the split-off point at which the company is indifferent
Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split-off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows. Sales Value and Additional Costs If Processed Further Product Pounds Produced Sales Value at Split-Off Final Sales Value Additional Cost Sea Tea 9,000 $ 60,000 $ 90,000 $ 35,000 Sea Paste 5,300 86,900 160,000 50,000 Sea Powder 2,000 70,000 85,000 14,000 Required: a-1. Compute the incremental benefit (cost) of further processing to these products. a-2. Which products should Kelp process beyond the split-off point? b. What is the selling price per pound of Sea Paste at the split-off point at which the company is indifferent
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split-off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows.
| Sales Value and Additional Costs If Processed Further |
|||||||||||||
| Product | Pounds Produced |
Sales Value at Split-Off | Final Sales Value |
Additional Cost |
|||||||||
| Sea Tea | 9,000 | $ | 60,000 | $ | 90,000 | $ | 35,000 | ||||||
| Sea Paste | 5,300 | 86,900 | 160,000 | 50,000 | |||||||||
| Sea Powder | 2,000 | 70,000 | 85,000 | 14,000 | |||||||||
Required:
a-1. Compute the incremental benefit (cost) of further processing to these products.
a-2. Which products should Kelp process beyond the split-off point?
b. What is the selling price per pound of Sea Paste at the split-off point at which the company is indifferent?
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