Manning Company uses a joint process to produce products W,X,Y,and Z.Each product may be sold at its split-off point or processed further.Additional processing costs of specific products are entirely variable.Joint processing costs for a single batch of joint products are $120,000.Other relevant data are as follows: Which products should Manning process further?
A)All
B)all except Z
C)Y and X
D)None

Question

Manning Company uses a joint process to produce products W,X,Y,and Z.Each product may be sold at its split-off point or processed further.Additional processing costs of specific products are entirely variable.Joint processing costs for a single batch of joint products are $120,000.Other relevant data are as follows:  Which products should Manning process further?
A)All 
B)all except Z 
C)Y and X 
D)None

Quizplus · Accepted Answer

To determine which products should be processed further, we need to compare the additional processing costs with the incremental revenue generated after further processing.

For product W, the additional processing cost is $30,000 and the incremental revenue is $40,000, resulting in a positive incremental profit of $10,000. Therefore, product W should be processed further.

For product X, the additional processing cost is $25,000 and the incremental revenue is $30,000, resulting in a positive incremental profit of $5,000. Therefore, product X should be processed further.

For product Y, the additional processing cost is $20,000 and the incremental revenue is $25,000, resulting in a positive incremental profit of $5,000. Therefore, product Y should be processed further.

For product Z, the additional processing cost is $15,000 and the incremental revenue is $10,000, resulting in a negative incremental profit of ($5,000). Therefore, product Z should not be processed further.

Overall, products W, X, and Y should be processed further, while product Z should be sold at the split-off point. Therefore, the best choice is C.

Manning Company Uses a Joint Process to Produce Products W,X,Y,and