Information about three joint products follows: The cost of the joint process is $140,000.Which of the joint products should be processed further?
A)X
B)Y
C)Z
D)both X and Y

Question

Information about three joint products follows:  The cost of the joint process is $140,000.Which of the joint products should be processed further?
A)X 
B)Y 
C)Z 
D)both X and Y

Quizplus · Accepted Answer

To determine which joint product should be processed further, we need to use the incremental approach. This approach involves comparing the additional revenue that can be earned from processing each product further to the additional processing costs.

For product X, the additional revenue from further processing is $60,000 ($200,000 - $140,000), but the additional processing cost is $80,000. Therefore, processing X further would result in a loss of $20,000 ($60,000 - $80,000).

For product Y, the additional revenue from further processing is $50,000 ($190,000 - $140,000), and the additional processing cost is $40,000. Therefore, processing Y further would result in a profit of $10,000 ($50,000 - $40,000).

For product Z, the additional revenue from further processing is $30,000 ($170,000 - $140,000), and the additional processing cost is $25,000. Therefore, processing Z further would result in a profit of $5,000 ($30,000 - $25,000).

Based on this analysis, the best choice would be to process product C further.

Information About Three Joint Products Follows: the Cost of the Joint