Delite Confectionary Company produces various types of candies.Several candies could be sold at the split-off point or processed further and sold in a different form after further processing.The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly,which are allocated based on pounds produced.Information concerning this process for a recent month appears below:
Based on the information presented,which of the products should be processed further?
A) Sweet Meats only.
B) Both Sweet Meets and Chocolate Delight.
C) Minty Wonders only.
D) Both Sweet Meats and Minty Wonders.

Question

Delite Confectionary Company produces various types of candies.Several candies could be sold at the split-off point or processed further and sold in a different form after further processing.The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly,which are allocated based on pounds produced.Information concerning this process for a recent month appears below:
 Based on the information presented,which of the products should be processed further?
A) Sweet Meats only. 
B) Both Sweet Meets and Chocolate Delight. 
C) Minty Wonders only. 
D) Both Sweet Meats and Minty Wonders.

Quizplus · Accepted Answer

To determine which products should be processed further, we need to compare the additional processing costs to the incremental revenue generated by selling the product in the further processed form. 
For Sweet Meats, the additional processing costs are $2 per pound and the incremental revenue generated by selling the candy in the further processed form is $3 per pound. Therefore, it is profitable to process Sweet Meats further. 
For Chocolate Delight, the additional processing costs are $3 per pound and the incremental revenue generated by selling the candy in the further processed form is $2 per pound. Therefore, it is not profitable to process Chocolate Delight further. 
For Minty Wonders, the additional processing costs are $1 per pound and the incremental revenue generated by selling the candy in the further processed form is $2 per pound. Therefore, it is profitable to process Minty Wonders further. 
Based on this analysis, the best choice is to process both Sweet Meats and Minty Wonders further.

Delite Confectionary Company Produces Various Types of Candies