Information about three joint products follows: The cost of the joint process is $140,000. Which of the joint products should be processed further?
A) X.
B) Y.
C) Z.
D) Both X and Y.

Question

Information about three joint products follows:  The cost of the joint process is $140,000. Which of the joint products should be processed further?
A) X. 
B) Y. 
C) Z. 
D) Both X and Y.

Quizplus · Accepted Answer

To determine which joint product should be processed further, we need to compare their incremental revenue (additional revenue from further processing) to their incremental processing costs. 
For product X, the incremental revenue is $150,000 - $100,000 = $50,000, but the incremental processing cost is $50,000, so there is no additional profit from further processing.
For product Y, the incremental revenue is $90,000 - $60,000 = $30,000, and the incremental processing cost is $30,000, so there is also no additional profit from further processing.
For product Z, the incremental revenue is $80,000 - $50,000 = $30,000, but the incremental processing cost is only $10,000, so there is an additional profit of $20,000 from further processing. Therefore, product Z should be processed further.

Information About Three Joint Products Follows: the Cost of the Joint