question archive In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane

In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane

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In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane. Joint processing costs up to the split-off point total $94,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: raw sugar, $47,000; brown sugar, $52,000; and white sugar, $54,750.

     Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

 

ProductAdditional Processing CostsSales

Value  Raw sugar$50,180 $94,000   Brown sugar$33,100 $88,000   White sugar$33,150 $107,500 

 

Required:a.Compute the Incremental profit (loss) for each product. (Loss amounts should be indicated by a minus sign.)  

       

 

 

 

b.Which product or products should be sold at the split-off point? (Select all that apply.)

   

 

 

c.Which product or products should be processed further? (Select all that apply.)

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a.Compute the Incremental profit (loss) for each product: Refer to attachment for solution

 

b.Which product or products should be sold at the split-off point?: Raw Sugar should be sold at split-off point as further processing will lead to incremental loss of $3180

 

c.Which product or products should be processed further?: Brown Sugar and White Sugar should be processed further as there is incremental profit $2900 and $19600 respectively.

 

Raw Sugar Brown Sugar White Sugar

Sales Value (Post Processing) 94000 88000 107500

Less: Sales Value at split off point 47000 52000 54750

Incremental Sales Revenue 47000 36000 52750

Less: Additional Incremental Costs 50180 33100 33150

Incremental Profit/loss -3180 2900 19600