Green Products Co. recycles plastics to produce a variety of products. One of their processes yields two different outputs: Construction-grade (used in outdoors benches and tables), and Compression-type, used to create ergonomic flooring. One production run produces 200 pounds of Construction-grade plastics, and 100 pounds of Compression-type plastics.
Green Products can process the plastics further, or can sell the raw materials to other companies. The process to produce one batch (before the split-off point) requires $120 of direct materials, $400 of direct labor, and $160 of variable overhead, with an allocation of $100 of fixed overhead. At the split-off point, Construction-grade plastics sell for $4/pound, and Compression-type plastics sell for $2/pound.
Using the relative sales value approach, what is the gross profit that would be realized per batch on Compression-type plastics if sold at the split-off point?

Question

Green Products Co. recycles plastics to produce a variety of products. One of their processes yields two different outputs: Construction-grade (used in outdoors benches and tables), and Compression-type, used to create ergonomic flooring. One production run produces 200 pounds of Construction-grade plastics, and 100 pounds of Compression-type plastics. 
Green Products can process the plastics further, or can sell the raw materials to other companies. The process to produce one batch (before the split-off point) requires $120 of direct materials, $400 of direct labor, and $160 of variable overhead, with an allocation of $100 of fixed overhead. At the split-off point, Construction-grade plastics sell for $4/pound, and Compression-type plastics sell for $2/pound.
Using the relative sales value approach, what is the gross profit that would be realized per batch on Compression-type plastics if sold at the split-off point?

Quizplus · Accepted Answer

The Answer of Green Products Co. recycles plastics to produce a variety of products. One of their processes yields two different outputs: Construction-grade (used in outdoors benches and tables), and Compression-type, used to create ergonomic flooring. One production run produces 200 pounds of Construction-grade plastics, and 100 pounds of Compression-type plastics. 
Green Products can process the plastics further, or can sell the raw materials to other companies. The process to produce one batch (before the split-off point) requires $120 of direct materials, $400 of direct labor, and $160 of variable overhead, with an allocation of $100 of fixed overhead. At the split-off point, Construction-grade plastics sell for $4/pound, and Compression-type plastics sell for $2/pound.
Using the relative sales value approach, what is the gross profit that would be realized per batch on Compression-type plastics if sold at the split-off point?