The Foxmoor Company produces three products, X, Y, and Z, from a single raw material input. Product Y can be sold at the split-off point for total revenues of $50,000 or it can be processed further at a total cost of $16,000 and then sold for $68,000. Product Y:
A) Should be sold at the split-off point, rather than processed further.
B) Would increase the company's overall net income by $18,000 if processed further and then sold.
C) Would increase the company's overall net income by $68,000 if processed further and then sold.
D) Would increase the company's overall net income by $2,000 if processed further and then sold.

Question

Quizplus · Accepted Answer

The additional revenue from processing further is $68,000 - $50,000 = $18,000. The additional cost is $16,000. Therefore, the net increase in income is $18,000 - $16,000 = $2,000.

The Foxmoor Company Produces Three Products, X, Y, and Z