Question

Two products, QI and VH, emerge from a joint process. Product QI has been allocated $19,300 of the total joint costs of $40,000. A total of 2,600 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $13 per unit, or it can be processed further for an additional total cost of $10,600 and then sold for $15 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point?

Answer 1

Answer:

Net advantage (disadvantage) ($5,400)

Explanation:

Product QI

Sales value after further processing ($15 × 2,600) $39,000

Costs of further processing $10,600

Benefit of further processing $28,400

($39,000-$10 600)

Less: Sales value at split-off point ($13 × 2,600) $33 800

Net advantage (disadvantage) ($5,400)

Answer 2

Answer:

Thus, profit will be decreased by $5,400

Explanation:

Gain from selling at the split-off point

= $13 x 2,600= 33,800

Gain from Processsing further:

= $15 x 2,600 - processing cost $10,600

= $39,000 - $10,600

=$28,400

Gain from selling at the split-off point  - Gain from Processsing further

= $33,800- $28,400= $5,400 decrease in overall profit

So, If product QI is processed further and sold, then overall profit will be decreased by $5,400