Question

Posh Pillows manufactures two products, pillows and cushions, from a joint process. Pillows are allocated $7,100 of the total joint costs of $25,000. There are 2,600 pillows produced and 2,600 cushions produced each year. Pillows can be sold at the split-off point for $10 per unit, or they can be processed further into a deluxe pillow for additional processing costs of $8.500 and sold for $18 for each deluxe pillow. If the pillows are processed further and made into deluxe pillows, the effect on operating income would be OA. $26,000 net increase in operating income. O B. $12,300 net increase in operating income. C. $12,300 net decrease in operating income. O D. $26,000 net decrease in operating income.

Answer 1

		sales at split		processed	increase
sales		26,000		46800
addittional cost				-8,500
profit		26,000		38300	12,300
option b
$12,300 net increase In operating income