Allegan Corporation manufactures two products, sugar crystals and sugar syrup, from a joint process of harvesting sugar beets. Sugar crystals are allocated $190,000 of the total joint costs of $223,000. There are 2,500 bushels of sugar crystals produced and 3,000 gallons of sugar syrup produced each year. Sugar crystals can be sold at the split-off point for $13 per unit, or they can be processed further into a refined white sugar crystal for additional processing costs of $8,800 and sold for $26 for each. If the sugar crystals are processed further and made into refined white sugar, the effect on net operating income would be: $23,700 net increase in operating income. $32,500 net decrease in operating income. $32,500 net increase in operating income. $23,700 net decrease in operating income.
| Incremental Revenue = | (2500 x $ 26)-(2500 x $ 13) | |||
| = | $ 32,500.00 | |||
| Incremental Cost | = | $ 8,800.00 | ||
| Increase in net operating income = | $ 23,700.00 | |||
Allegan Corporation manufactures two products, sugar crystals and sugar syrup, from a joint process of harvesting...