Gary Corporation produces products X, Y, and Z from a single raw material input. Budgeted data for the next month is as follows: If the cost of raw material input is $150,000, which of the products should be processed beyond the split-off point?
A)Option A
B)Option B
C)Option C
D)Option D

Question

Gary Corporation produces products X, Y, and Z from a single raw material input. Budgeted data for the next month is as follows:  If the cost of raw material input is $150,000, which of the products should be processed beyond the split-off point? 
A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

To determine the product(s) that should be processed beyond the split-off point, we need to calculate the incremental revenue and incremental costs for each product.

Product X:
$140,000 (sales revenue) - $75,000 (incremental costs) = $65,000 (incremental profit)

Product Y:
$50,000 (sales revenue) - $45,000 (incremental costs) = $5,000 (incremental profit)

Product Z:
$40,000 (sales revenue) - $32,000 (incremental costs) = $8,000 (incremental profit)

Based on the incremental profit, Product C (Option C) should be processed beyond the split-off point as it results in the highest incremental profit of $65,000.

Gary Corporation Produces Products X, Y, and Z from a Single