A joint production process at Happy Days Farms results in two products,blackberry syrup and blackberry jam.The following cost and activity data relate to these two products:

Blackberry syrup can be sold as-is (at the split-off point)for $2.50 per unit,or it can be processed further into a specialty blackberry juice and then sold for $5.00 per unit.If blackberry syrup is processed further into the specialty blackberry juice,what would be the overall effect on operating income?

Question

A joint production process at Happy Days Farms results in two products,blackberry syrup and blackberry jam.The following cost and activity data relate to these two products:

Blackberry syrup can be sold as-is (at the split-off point)for $2.50 per unit,or it can be processed further into a specialty blackberry juice and then sold for $5.00 per unit.If blackberry syrup is processed further into the specialty blackberry juice,what would be the overall effect on operating income?

Quizplus · Accepted Answer

A)
Selling Price after further processing 1500 × $5.00 = $7,500
Additional Processing cost 2,000
Net Income 5,500
Less Income if sold at split-off point 1,500 × $2.50 3,750
Equals increase in Operating Income $1,750

A Joint Production Process at Happy Days Farms Results in Two