Lido manufactures A and B from a joint process (cost = $80,000). Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16. If Lido decides to process B beyond the split-off point, operating income will:
A) increase by $10,000.
B) increase by $20,000.
C) decrease by $10,000.
D) decrease by $20,000.
E) decrease by $58,000.

Question

Quizplus · Accepted Answer

The additional revenue from processing B further is $10,000 (10,000 pounds x ($16 - $15)), but the additional cost is $20,000, resulting in a net decrease in operating income of $10,000.

Lido Manufactures a and B from a Joint Process (Cost