Paulsen Corporation makes two products, W and P, in a joint process. At the spli
ID: 2564235 • Letter: P
Question
Paulsen Corporation makes two products, W and P, in a joint process. At the split-off point, 50,000 units of W and 60,000 units of P are available each month. Monthly joint production costs are $290,000. Product W can be sold at the split-off point for $5.60 per unit. Product P either can be sold at the split-off point for $4.75 per unit or it can be further processed and sold for $7.20 per unit. If P is processed further, additional processing costs of $3.10 per unit will be incurred. If P is processed further and then sold, rather than being sold at the split-off point, the change in monthly net operating income would be a:
Explanation / Answer
Per unit revenue if processed further 7.2 Per unit revenue if sold at split off point 4.75 Incremental per unit revenue 2.45 Additional processing costs per unit 3.1 Incremental income per unit -0.65 Number of units 60000 Incremental net operating income(loss) -39000 Monthly net operating income will decrease by $39000