Two products, IF and RI, emerge from a joint process. Product IF has been alloca
ID: 2344738 • Letter: T
Question
Two products, IF and RI, emerge from a joint process. Product IF has been allocated $31,300 of the total joint costs of $52,000. A total of 2,600 units of product IF are produced from the joint process. Product IF can be sold at the split-off point for $15 per unit, or it can be processed further for an additional total cost of $10,600 and then sold for $17 per unit. If product IF is processed further and sold, what would be the effect on the overall profit of the company compared with sale in its unprocessed form directly after the split-off point?$25,900 more profit
$39,100 less profit
$5,400 less profit
$33,600 more profit
Explanation / Answer
If IF is further processed it will increase revenue by 2,600*(17-15) = 5,200, but the further processing will also increase costs by $10,600. The net effect of this is 5,200 – 10,600= -5,400. Answer: $5,400 less profit