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: Assuming the company correctly identifies which product(s) to process further, what will be the company's increase in profits by further processing the identified product(s)?

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:  Assuming the company correctly identifies which product(s) to process further, what will be the company's increase in profits by further processing the identified product(s)?

Quizplus · Accepted Answer

Berry Delight - ($10 - $8) x 63,000 - $88,000 = $38,000 increase 
Chocolate Wonder - ($10.50 - $10) x 113,000 - $43,000 = $13,500 increase 
$38,000 + $13,500 = $51,500 increase 
(final price per unit - price per unit at split-off) x lbs produced - further processing costs = increase (decrease) 
Berry delight increase + chocolate wonder increase = net increase

The Sweete Shoppe Produces a Variety of Sweet Treats