Somalia Corporation has a joint process that produces three products: X, Y, and Z.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $100,000.Other relevant data are as follows: $\begin{array}{rlc}
&& \text { Separable } & \
&& \text { Processing } & \
&\text { Sales Value } & \text { Costs after } & \text { Sales Value } \
\text { Product } & \text {at Split-off } & \text { Split-off } & \text { at Completion }\
\mathrm{X} & \$ 128,000 & \$ 16,000 & \$ 160,000 \
\mathrm{Y} & 50,000 & 26,000 & 76,000 \
\mathrm{Z} & 25,600 & 20,000 & 40,000
\end{array}$ In processing Product Z further _____.
A)profits will decrease by $5,600
B)incremental profits will exceed incremental costs
C)profits will increase by $20,000
D)the additional revenue produced will exceed the additional costs

Question

Somalia Corporation has a joint process that produces three products: X, Y, and Z.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $100,000.Other relevant data are as follows: $\begin{array}{rlc} 
&& \text { Separable } & \
&& \text { Processing } & \
&\text { Sales Value } & \text { Costs after } & \text { Sales Value } \
\text { Product } & \text {at Split-off } & \text { Split-off } & \text { at Completion }\
\mathrm{X} & \$ 128,000 & \$ 16,000 & \$ 160,000 \
\mathrm{Y} & 50,000 & 26,000 & 76,000 \
\mathrm{Z} & 25,600 & 20,000 & 40,000
\end{array}$ In processing Product Z further _____.
A)profits will decrease by $5,600
B)incremental profits will exceed incremental costs
C)profits will increase by $20,000
D)the additional revenue produced will exceed the additional costs

Quizplus · Accepted Answer

For Product Z, the additional revenue from processing further is $40,000 - $25,600 = $14,400. The additional costs are $20,000. Therefore, processing further will decrease profits by $20,000 - $14,400 = $5,600.

Somalia Corporation Has a Joint Process That Produces Three Products