Two products, QI and VH, emerge from a joint process. Product QI has been allocated $9,600 of the total joint costs of $12,000. A total of 9,000 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $13 per unit, or it can be processed further for an additional total cost of $54,000 and then sold for $18 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) ($18,600)
B) $108,000
C) $600
D) ($9,000)

Question

Quizplus · Accepted Answer

The financial disadvantage is calculated by comparing the additional revenue from further processing with the additional costs. Additional revenue from further processing is (18 - 13) * 9,000 = $45,000. The additional cost is $54,000. The disadvantage is $45,000 - $54,000 = ($9,000).

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