Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $46,000 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:
Required:a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?

Question

Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $46,000 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:
  Required:a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?

Quizplus · Accepted Answer

The Answer of Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $46,000 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:
  Required:a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point?b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?

Ibsen Company Makes Two Products from a Common Input