Legacy Company currently produces three products from a joint process. The joint process has total costs...
Legacy Company currently produces three products from a joint
process. The joint process has total costs of $210,000 per month.
All three products, A, B & C, are immediately saleable as they
come out of the joint process. Alternatively, any of the products
could continue on with additional processing and be sold as a more
complete product. The following information is available:
| Units | Immediate Sales Price | Later Sales Price | Unit Cost of Further Processing | |||||||||||
| A | 46,000 | $ | 6 | $ | 9 | $ | 7 | |||||||
| B | 92,000 | $ | 8 | $ | 14 | $ | 5 | |||||||
| C | 138,000 | $ | 9 | $ | 14 | $ | 6 | |||||||
a-1. Should Product A be sold immediately or sold
after processing further?
-
Sell Now
-
Sell Later
a-2. How much will the decision affect profit?
Homework Answers
Solution a1:
| Product A | |
| Sale value after further processing | $414,000.00 |
| Sale value immediate | $276,000.00 |
| Incremental revenue | $138,000.00 |
| Further processing cost | $322,000.00 |
| Incremental profit (Loss) on further processing | -$184,000.00 |
Product A should be sold immediately
Solution a2:
Decision will affect the profit by $184,000
Add Answer to:
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