Hogan Corporation has a joint process which produces three products: P, G, and A. Each product may be sold at split- off or processed further and then sold. Joint processing costs for a year amount to $25,000. Other relevant data are as follows: $\begin{array}{llll}&&\text { Separable }\&&\text { Processing }\
& \text { Sales V alue at } & \text { Costs after } & \text { Sales Value at } \
\text { Product } & \text { Split- off } & \underline{\text { Split-off }} & \text { Completion }\
\mathrm{P} & \$ 32,000 & \$ 5,000 & \$ 40,000 \
\mathrm{G} & 16,500 & 7,500 & 29,000 \
\mathrm{~A} & 6,400 & 8,000 & 10,000
\end{array}$ Once product P is produced, processing it further will cause profits to:
A) decrease by $5,000
B) decrease by $8,000
C) increase by $3,000
D) increase by $8,000

Question

Quizplus · Accepted Answer

The increase in profit from processing product P further is calculated by taking the sales value at completion ($40,000) minus the sales value at split-off ($32,000) and subtracting the separable processing costs ($5,000). This results in an increase of $3,000 ($40,000 - $32,000 - $5,000 = $3,000).

Hogan Corporation Has a Joint Process Which Produces Three Products