Curbook Company manufactures three joint products X Y and Z

Curbook Company manufactures three joint products: X, Y, and Z. The cost of the joint process is $30,000. Information about the three products follows: Anticipated production Selling price/kg at split-off Additional processing costs/kg after split-off (all variable) Selling price/kg after further processing Allocated joint costs 5,600 kg $2.00 10,000 kg $1.00 2,500 kg $3.00 $1.50 $2.50 $12,000 $1.25 $3.75 $10,500 S0.75 $6.25 $7,500 Required: A. Determine whether each product should be sold at split-off or processed further and calculate the impact on income for each product by choosing the better option. (9 marks) Determine the firm\'s income if the firm processed all three products beyond split-off. (1 mark) B.

Solution

Answer A Calculation of income from each product if sold at split-off point Products X Y Z Sales value at split off point $11,200 $10,000 $7,500 Less : Allocated Joint cost $12,000 $10,500 $7,500 Income from products if sold at split off point -$800 -$500 $0 Calculation of income from each product if sold after further processing Products X Y Z Sales value after further processing $14,000 $37,500 $15,625 Less : Allocated joint cost $12,000 $10,500 $7,500 Less : Additional Processing cost $8,400 $12,500 $1,875 Income from products if processed further -$6,400 $14,500 $6,250 Product X should be sold at split off point as further processing leads to increase in loss by $5600. Product Y and Z is to be processed further as it will lead to additional income of $15000 and $6250 respectively. Answer B Total income of the firm would be $14350 if the firm processed all three products beyond split off.