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Sell or Process Further

Product A and B are produced jointly but Product B can be processed further. The document provides information on quantities, selling prices, and costs of Product A and B whether at the split-off point or if Product B is processed further. It performs three analyses - incremental, opportunity cost, and total project approach - to determine if Product B should be sold at the split-off point or processed further, with the opportunity cost approach finding a $5,000 gain from further processing.

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Gina Garcia
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1K views

Sell or Process Further

Product A and B are produced jointly but Product B can be processed further. The document provides information on quantities, selling prices, and costs of Product A and B whether at the split-off point or if Product B is processed further. It performs three analyses - incremental, opportunity cost, and total project approach - to determine if Product B should be sold at the split-off point or processed further, with the opportunity cost approach finding a $5,000 gain from further processing.

Uploaded by

Gina Garcia
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Product A and B are produced in a joint process. At split-off point, Product A is complete whereas product B can be process further.

The following additional information is available:

Product Quantity in Units Selling Price Per Unit: At Split-Off If Processed Further Costs After Split-Off

A 5,000 $10

B 10,000 $2.5 $5 $20,000

Perform sell-or-process-further analysis for product B. Solution Incremental Approach:

Incremental Revenue Incremental Costs Increase in Profits Due to Further Processing


Opportunity Cost Approach:

$25,000 20,000 $5,000

Sales in Case of Further Processing Costs: Additional Costs Opportunity Cost of Not Selling at Split-Off Gain on Further Processing
Total Project Approach:

$50,000 20,000 25,000 $5,000

Revenue Costs Net Revenue Gain from Further Processing

Split-Off Further Point Processed $25,000 $50,000 0 20,000 $25,000 $30,000 $5,000

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