Indiana Corporation has $200,000 of joint processing costs and is studying whether to process J and K beyond the split-off point. Information about J and K follows. If Indiana desires to maximize total company income, what should the firm do with regard to Products J and K?
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question

Indiana Corporation has $200,000 of joint processing costs and is studying whether to process J and K beyond the split-off point. Information about J and K follows.  If Indiana desires to maximize total company income, what should the firm do with regard to Products J and K? 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Quizplus · Accepted Answer

Based on the information provided, Indiana Corporation should process J and K beyond the split-off point. This is because the incremental revenue from processing both products beyond the split-off point ($250,000) is higher than the incremental processing costs ($200,000). By processing both products further, Indiana would earn an incremental profit of $50,000 ($250,000 - $200,000). This would increase the total income for the company and therefore should be the best choice.

Indiana Corporation Has $200,000 of Joint Processing Costs and Is