The Sweete Shoppe produces a variety of sweet treats. Several treats can be sold at split-off or further processed to produce a different type of treat. The following three treats are all produced in a joint processing operation at a cost of $63,000. The costs are allocated based on pounds produced. Information for these treats is as follows: Which, if any, products should be processed further?

Question

The Sweete Shoppe produces a variety of sweet treats. Several treats can be sold at split-off or further processed to produce a different type of treat. The following three treats are all produced in a joint processing operation at a cost of $63,000. The costs are allocated based on pounds produced. Information for these treats is as follows:  Which, if any, products should be processed further?

Quizplus · Accepted Answer

Berry Delight - ($10 - $8) x 63,000 - $88,000 = $38,000 increase (process further) 
Chocolate Wonder - ($10.50 - $10) x 113,000 - $43,000 = $13,500 increase (process further) 
Caramel Chip - ($5.60 - 5) x 38,000 - $33,000 = $10,200 decrease (sell as is) 
(final price per unit - price per unit at split-off) x lbs produced - further processing costs = increase (decrease)

The Sweete Shoppe Produces a Variety of Sweet Treats