A joint production process at Sunny Brooks Dairy results in two products,cherry jelly and cherry jam.The following cost and activity data relate to these two products:

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

Question

A joint production process at Sunny Brooks Dairy results in two products,cherry jelly and cherry jam.The following cost and activity data relate to these two products:

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

Quizplus · Accepted Answer

D)
Selling Price after further processing 2000 × $5.00 = $10,000
Additional Processing cost 2,200
Net Income 7,800
Less Income if sold at split-off point 2,000 × $2.50 5,000
Equals increase in Operating Income $2,800

A Joint Production Process at Sunny Brooks Dairy Results in Two