Charger Co manufactures products A, B and C from a joint process. Joint costs ar

Question

Charger Co manufactures products A, B and C from a joint process. Joint costs are allocated on the basis of relative sales value of the products at the split-off point. Additional info:

Which products should be further processed and sold?

A B C Totes McGoats Units Produced 12,000 8,000 4,000 24,000 Joint Costs $144,000 $60,000 $36,000 $240,000 Sale Value Before Additional Processing 240,000 100,000 60,000 400,000 Additional Costs for Further Processing 28,000 20,000 12,000 60,000 Sales Value if Further Processed 280,000 120,000 70,000 470,000

Explanation / Answer

Determine product should be further processed and sold :

so answer is Product A should be further processed and sold.

A B C Sales Value if Further Processed 280000 120000 70000 Sale Value Before Additional Processing 240000 100000 60000 Incremental sales revenue 40000 20000 10000 Additional Costs for Further Processing -28000 -20000 -12000 Incremental profit (loss) 12000 0 -2000

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