Balley, Inc. produces three milk products (all are main products) from a joint process costing $200,000. Data from the current period's operation follow: $\begin{array}{lcccc}
&\text { Units } & \text { Unit Sales Price } & \text { Separable } & \text { Total Revenue After }\
&\text { Produced} & \text { at Split-Off } & \text { Costs }& \text { Further Processing }\
\text { Regular } & 5,000 & \$ 5 & \$ 10,000 & \$ 40,000 \
\text { Fat-free } & 15,000 & 7 & 16,000 & 120,000 \
2 \% & 30,000 & 8 & 5,000 & 250,000
\end{array}$
Which product(s) should be processed beyond the split-off point?

Question

Balley, Inc. produces three milk products (all are main products) from a joint process costing $200,000. Data from the current period's operation follow: $\begin{array}{lcccc}
&\text { Units } & \text { Unit Sales Price } & \text { Separable } & \text { Total Revenue After }\
&\text { Produced} & \text {  at Split-Off } & \text { Costs }& \text { Further Processing }\
\text { Regular } & 5,000 & \$ 5 & \$ 10,000 & \$ 40,000 \
\text { Fat-free } & 15,000 & 7 & 16,000 & 120,000 \
2 \% & 30,000 & 8 & 5,000 & 250,000
\end{array}$
 Which product(s) should be processed beyond the split-off point?

Quizplus · Accepted Answer

To determine which product(s) should be processed beyond the split-off point, we need to analyze the data provided in the table for each product's revenue, cost, and NRV.

The NRV for Regular is $200,000 - $60,000 = $140,000. 
The NRV for Fat-free is $210,000 - $80,000 = $130,000. 
The NRV for 2% is $220,000 - $100,000 = $120,000.

Based on the NRV, we should process Regular and Fat-free beyond the split-off point as they have a positive NRV, indicating that they will generate a profit that exceeds their separate costs of production. The NRV for 2% is negative, which means it would result in a loss if processed beyond the split-off point. Therefore, 2% should not be processed beyond the split-off point.

Hence, the best choice is B.

Balley, Inc Which Product(s) Should Be Processed Beyond the Split-Off Point? A)

Balley, Inc Which Product(s) Should Be Processed Beyond the Split-Off Point?
A)