Sell or process further joint product decision Highland manu

Sell or process further joint product decision

Highland manufactures A and B from a joint process cost= $70,000. Six thousand pounds of A can be sold at split off for $20 per pound or processed further at an additional cost of $20,000 and then sold for $23. Ten thousand pounds of B can be sold at split off for $15 per pound or processed further at an additional cost of $13,000 and later sold for $17.

Which products should be processed further or not? Why? Give the dollar impact to income for each product based on your recomendation.

Solution

Joint cost incurred is irrelevant as it will be incurred whether product is processed further or not

since product A result in loss of $- 2000 from further processing it should not be processed further .whereas

product B result in profit of $ 70000 from further procesing so it should be processed further.