Lido Company manufactures A and B from a joint process (cost = $80,000). Five thousand pounds of A can be sold at split-off for $20 per pound or processed further at an additional cost of $20,000 and then sold for $25. Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16. If Lido decides to process B beyond the split-off point, operating income will:

Question

Quizplus · Accepted Answer

Processing B further costs $20,000 but only increases revenue by $10,000 (10,000 pounds x $1 increase per pound), resulting in a $10,000 decrease in operating income.

Lido Company Manufactures a and B from a Joint Process