Karl Body Parts produces three products in a joint process: Arms, Legs, and Heads. The joint costs are as follows: The hypothetical values for Arms, Legs, and Heads are £40,000, £50,000, and £30,000, respectively. If management processes the three products beyond the split-off point, sales values for Arms, Legs, and Heads would increase to £75,000, £65,000, and £60,000, respectively. In order to process the products further, the company must incur separable costs of £7,000, £16,000, and £5,000 for products Arms, Legs, and Heads, respectively. Karl uses the sales-value-at-split-off method to allocate joint costs. Should Karl Body Parts process Arms further?
A) Process further; profits will increase £28,000.
B) Sell now.
C) Process further; profits will increase £35,000.
D) Process further; profits will increase £68,000.

Question

Karl Body Parts produces three products in a joint process: Arms, Legs, and Heads. The joint costs are as follows:  The hypothetical values for Arms, Legs, and Heads are £40,000, £50,000, and £30,000, respectively. If management processes the three products beyond the split-off point, sales values for Arms, Legs, and Heads would increase to £75,000, £65,000, and £60,000, respectively. In order to process the products further, the company must incur separable costs of £7,000, £16,000, and £5,000 for products Arms, Legs, and Heads, respectively. Karl uses the sales-value-at-split-off method to allocate joint costs. Should Karl Body Parts process Arms further?
A) Process further; profits will increase £28,000. 
B) Sell now. 
C) Process further; profits will increase £35,000. 
D) Process further; profits will increase £68,000.

Quizplus · Accepted Answer

The Answer of Karl Body Parts produces three products in a joint process: Arms, Legs, and Heads. The joint costs are as follows:  The hypothetical values for Arms, Legs, and Heads are £40,000, £50,000, and £30,000, respectively. If management processes the three products beyond the split-off point, sales values for Arms, Legs, and Heads would increase to £75,000, £65,000, and £60,000, respectively. In order to process the products further, the company must incur separable costs of £7,000, £16,000, and £5,000 for products Arms, Legs, and Heads, respectively. Karl uses the sales-value-at-split-off method to allocate joint costs. Should Karl Body Parts process Arms further?
A) Process further; profits will increase £28,000. 
B) Sell now. 
C) Process further; profits will increase £35,000. 
D) Process further; profits will increase £68,000.

Karl Body Parts Produces Three Products in a Joint Process