Balley, Inc. produces three milk products (all are main products)from a joint process costing $200,000. Data from the current period's operation follow: Units Unit Sales Price Separable Total Revenue After
Produced at Split-Off Costs Further Processing
Regular 5,000 $5 $10,000 $ 40,000
Fat-free 15,000 7 16,000 120,000
2% 30,000 8 5,000 250,000
Which product(s)should be processed beyond the split-off point?

Question

Quizplus · Accepted Answer

The best choice is to process Regular and 2% milk beyond the split-off point. This is because their total revenue after further processing ($290,000) is greater than their separable costs ($15,000). Processing Fat-free milk beyond the split-off point would result in a loss since the total revenue after further processing ($136,000) is less than the separable costs ($160,000). Therefore, the answer is option B.