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Arcadia, SA, Uses a Joint Process to Produce Products W

Question 62

Essay

Arcadia, SA, uses a joint process to produce Products W, X, Y, 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 £200,000. Other relevant data are as follows:  Sales Value  Additional Sales Value of  Product  at Split-off  Processing Costs  Final Froduct W£40,000£24,000£70,000X16,00010,00020,000Y20,00010,00048,000Z24,00016,00036,000£100,000£60,000£174,00\begin{array}{ccc}&\text { Sales Value }&\text { Additional }&\text {Sales Value of }\\\text { Product } & \text { at Split-off }& \text { Processing Costs } &\text { Final Froduct }\\W&£ 40,000 & £ 24,000 & £ 70,000 \\X&16,000 & 10,000 & 20,000 \\ Y&20,000 & 10,000 & 48,000 \\ Z&24,000 & 16,000 & 36,000 \\&£ 100,000 &£ 60,000& £174,00 \\\end{array}
a.Determine which products should be processed further.
b.How will processing each product further affect profits?

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