GreenWood 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. GreenWood 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 $60 of direct materials, $200 of direct labor, and $80 of variable overhead, with an allocation of $50 of fixed overhead, which is included in calculation of gross profit. At the split-off point, Construction-grade plastics sell for $2/pound, and Compression-type plastics sell for $1/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

GreenWood 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. GreenWood 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 $60 of direct materials, $200 of direct labor, and $80 of variable overhead, with an allocation of $50 of fixed overhead, which is included in calculation of gross profit. At the split-off point, Construction-grade plastics sell for $2/pound, and Compression-type plastics sell for $1/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 GreenWood 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. GreenWood 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 $60 of direct materials, $200 of direct labor, and $80 of variable overhead, with an allocation of $50 of fixed overhead, which is included in calculation of gross profit. At the split-off point, Construction-grade plastics sell for $2/pound, and Compression-type plastics sell for $1/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?