Walman Corp.manufactures products X,Y,and Z from a joint process.Joint costs are allocated on the basis of relative sales value at the split-off point.Additional information is as follows:
Which of the three products should be manufactured beyond the split-off point?
A)X only
B)Y only
C)Z only
D)Y and Z
E)X,Y and Z

Question

Walman Corp.manufactures products X,Y,and Z from a joint process.Joint costs are allocated on the basis of relative sales value at the split-off point.Additional information is as follows: 
Which of the three products should be manufactured beyond the split-off point?
A)X only 
B)Y only 
C)Z only 
D)Y and Z 
E)X,Y and Z

Quizplus · Accepted Answer

Based on the information provided, product Y has the highest sales value per unit at the split-off point ($20 per unit compared to $15 per unit for X and $10 per unit for Z). Therefore, it makes sense to continue producing Y beyond the split-off point. Additionally, product Z also has a positive incremental revenue over its incremental costs, which indicates that it is profitable to produce beyond the split-off point. Therefore, both Y and Z should be manufactured beyond the split-off point. Product X, on the other hand, has a negative incremental revenue over its incremental costs, which means that it is not profitable to produce beyond the split-off point. Therefore, the answer is D, Y and Z.