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Product X and Y are made from a common input. Joint processing costs up to the...

Product X and Y are made from a common input. Joint processing costs up to the split-off point total $46,900 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:

Product X Product Y Total
Allocated joint processing costs $ 18,300 $ 28,600 $ 46,900
Sales value at split-off point $ 25,600 $ 37,350 $ 62,950
Costs of further processing $ 22,800 $ 17,100 $ 39,900
Sales value after further processing $ 47,800 $ 55,500 $ 103,300

a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.)

b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point? (Negative amount should be indicated by a minus sign.)

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Answer #1

a) Financial advantage of processing product X

Sale value after further processing 47800
Sale value at split off 25600
Incremental revenue 22200
Cost of further processing -22800
Financial Advantage (Disadvantage) -600

b) Financial advantage of processing product Y

Sale value after further processing 55500
Sale value at split off 37350
Incremental revenue 18150
Cost of further processing -17100
Financial Advantage (Disadvantage) 1050
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