Dowchow Corporation makes two products from a common input. Joint processing costs up to the split-off point total $38,400 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:

-What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
A)$1,600
B)$22,400
C)$27,600
D)$(3,600)

Question

Dowchow Corporation makes two products from a common input. Joint processing costs up to the split-off point total $38,400 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:

-What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?

-What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
A)$1,600 
B)$22,400 
C)$27,600 
D)$(3,600)

Quizplus · Accepted Answer

Processing Product X beyond the split-off point results in a net monetary disadvantage of $(3,600). This means that the cost of processing Product X beyond the split-off point is greater than the incremental revenue it generates. Therefore, it would be best to not process Product X beyond the split-off point and instead sell it at the split-off point.

Dowchow Corporation Makes Two Products from a Common Input