Naperville Corporation has a joint process that produces three products: P,G and A.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $25,000.The production level for each product is 10,000 units.Other data follows:
$\begin{array}{llll}
&\text { Sales Value }&\text {Separable Processing }&\text {Sales Value }\
\text {Product }&\text {at Split-Off}&\text {Costs after Split-Off }&\text { at Completion}\
P &\$ 12 & \$ 8 & \$ 21 \
G&10 & 4 & 17 \
A&15 & 6 & 19
\end{array}$
Processing Product P beyond the split-off point will cause profits to ________.
A) be unchanged
B) increase by $10,000
C) increase by $80,000
D) increase by $90,000

Question

Naperville Corporation has a joint process that produces three products: P,G and A.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $25,000.The production level for each product is 10,000 units.Other data follows:
$\begin{array}{llll}
&\text { Sales Value }&\text {Separable Processing }&\text {Sales Value }\
 \text {Product }&\text {at Split-Off}&\text {Costs after Split-Off }&\text { at Completion}\
P &\$ 12 & \$ 8 & \$ 21 \
G&10 & 4 & 17 \
A&15 & 6 & 19
\end{array}$
Processing Product P beyond the split-off point will cause profits to ________.
A) be unchanged
B) increase by $10,000
C) increase by $80,000
D) increase by $90,000

Quizplus · Accepted Answer

Processing Product P beyond the split-off point increases its sales value by $9 per unit ($21 - $12) while incurring an additional cost of $8 per unit. Thus, the profit increases by $1 per unit. With 10,000 units, the total profit increase is $10,000.

Naperville Corporation Has a Joint Process That Produces Three Products