A company puts four products through a common production pro

A company puts four products through a common production process. This process costs $100,000 each year. The four products can be sold when they emerge from this process at the split-off point, or processed further and then sold. Data about the four products for the coming period are: Determine which products should be sold at the split-off point and which should be processed further.

Solution

Singer: Increase in price per pound = 42 - 28 = 14
14*20,000 pounds = $280,000 additional profit, but since additional processing cost is $400,000, do not process singer further

talker: increase in price per pound = 28 - 7 = 21
21*10,000 pounds = $210,000 additional profit. Since additional processing cost is 144,000, which is less than then additional profit, you would process talker further.

walker: increase in price per pound = 36 - 36 = 0.
with no additional profit and increase cost of 120,000, you would not process walker further

sayer: same as walking, no increase in price but there is an increase in cost, so you would not process further.

the only one that should be processed further is talker, since the increase in sales 21*10,000 = 210,000 is greater than increase in costs of 144,000