Two products, QI and VH, emerge from a joint process. Product QI has been allocated $31,300 of the total joint costs of $52,000. A total of 2,600 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $15 per unit, or it can be processed further for an additional total cost of $10,600 and then sold for $17 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point?
A) ($39,100)
B) $(5,400)
C) $33,600
D) ($25,900)

Question

Quizplus · Accepted Answer

The financial advantage of processing further is calculated by comparing the net revenue from selling the product in its processed form to the net revenue from selling it in its unprocessed form. Selling price after further processing is $17 per unit for 2,600 units, totaling $44,200. The cost of further processing is $10,600, so the net revenue from selling after further processing is $44,200 - $10,600 = $33,600. Selling without further processing would bring in $15 per unit for 2,600 units, totaling $39,000. The financial advantage of processing further is $33,600 - $39,000 = $(5,400), indicating a disadvantage.

Two Products, QI and VH, Emerge from a Joint Process