Products A and B are produced from a single raw material input. The raw material costs $90,000, from which 5,000 units of A and10,000 units of B can be produced each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. Product B can be sold at the split-off point for $8 per unit, or it can be processed further at a cost of $40,000 and then sold for $12 per unit. What is the total change in net income if both products are processed further?
Products A and B are produced from a single raw material input. The raw material costs $90,000, from which 5,000 units of A and10,000 units of B can be produced each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. Product B can be sold at the split-off point for $8 per unit, or it can be processed further at a cost of $40,000 and then sold for $12 per unit. What is the total change in net income if both products are processed further?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter5: Support Department And Joint Cost Allocation
Section: Chapter Questions
Problem 6BE
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Products A and B are produced from a single raw material input. The raw material costs $90,000, from which 5,000 units of A and10,000 units of B can be produced each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. Product B can be sold at the split-off point for $8 per unit, or it can be processed further at a cost of $40,000 and then sold for $12 per unit. What is the total change in net income if both products are processed further?
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