Information about three joint products follows:
$\begin{array}{lccc}
&\underline{A}&\underline{B} &\underline{C}\
\text { Anticipated production } & 5,000 \mathrm{~kg} & 1,000 \mathrm{~kg} & 2,000 \mathrm{~kg} \
\begin{array}{l}
\text { Selling price/kg at split-off } \
\text { Additional processing costs/ } \mathrm{kg}
\end{array} & \$ 10 & \$ 30 & \$ 16 \
\begin{array}{l}
\text { after split-off (all variable) }
\end{array}& \$ 6 & \$ 12 & \$ 24 \
\begin{array}{l}
\text { Selling price/kg after further } \
\text { processing }
\end{array} &\$20&\$40&\$50 \
\end{array}$ The cost of the joint process is $140,000.
-Refer to the figure.If the firm is currently processing all three products beyond split-off,what would be the firm's income?

Question

Information about three joint products follows:
$\begin{array}{lccc}
&\underline{A}&\underline{B} &\underline{C}\
\text { Anticipated production } & 5,000 \mathrm{~kg} & 1,000 \mathrm{~kg} & 2,000 \mathrm{~kg} \
\begin{array}{l}
\text { Selling price/kg at split-off } \
\text { Additional processing costs/ } \mathrm{kg}
\end{array} & \$ 10 & \$ 30 & \$ 16 \
\begin{array}{l}
\text { after split-off (all variable) }
\end{array}& \$ 6 & \$ 12 & \$ 24 \
\begin{array}{l}
\text { Selling price/kg after further } \
\text { processing }
\end{array} &\$20&\$40&\$50 \
\end{array}$   The cost of the joint process is $140,000.
-Refer to the figure.If the firm is currently processing all three products beyond split-off,what would be the firm's income?

Quizplus · Accepted Answer

The correct answer is A because the firm's income would be $514,000 if it processed all three products beyond split-off. This is calculated as follows:Selling price of A after further processing = 5,000 kg x $20 = $100,000Selling price of B after further processing = 1,000 kg x $40 = $40,000Selling price of C after further processing = 2,000 kg x $50 = $100,000Total selling price after further processing = $240,000Additional processing costs = 5,000 kg x $6 + 1,000 kg x $12 + 2,000 kg x $24 = $168,000Net income = $240,000 - $168,000 = $72,000Add back the cost of the joint process = $72,000 + $140,000 = $212,000Multiply by the proportion of sales value of each product to total sales value = $212,000 x (100,000/240,000) = $514,000

Information About Three Joint Products Follows The Cost of the Joint Process Is $140,000