Micks Mineral Company makes two products from a common input

Mick\'s Mineral Company makes two products from a common input. Joint processing costs up to the split-off point total $33,600 per year. The company allocates these costs to the joint products on the basis of their sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Product A Product M Total $14,000 $19,600 $33,600 $20,000 $28,000 $48,000 Allocation of joint costs Sales value at split-off Sales value after further processingS50,200 $48,600 $98,800 Further processing costs $26,300 $24,500$50,800 What is the monetary advantage or disadvantage of processing Product M beyond the split-off point? $3,900 disadvantage $23,500 disadvantage $3,900 advantage $10,100 disadvantage

Solution

Advantage(disadvantage) of processing Product M = (48600-28000)-24500= -3900 Option 1 $3900 diadvantage is correct