2 Gary Corporation produces products X Y and Z from a single

2 Gary Corporation produces products X, Y, and Z from a single raw material input. Budgeted data for the next month is as follows: Product Y 2,300 $ 19 Product Z 3,300 $ 18 Product X 1,800 $ 16 Units produced Per unit sales value at split-off Added processing costs per unit Per unit sales value if processed further $ 20 $ 20 $ 25 If the cost of raw material input is $71,000, which of the products should be processed beyond the split-off point? A) B) C) D) Product X yes yes no no ProductY yes no yes Product Z no yes no yes O Option A O Option D Option C O Option B

Solution

Differential analysis :

So answer is d) Option B

	Product X	Product Y	Product Z
Sale value after further processing	20	20	25
Sale value at split off point	16	19	18
Incremental sale value	4	1	7
Incremental cost	3	5	5
Incremental profit (loss)	1	-4	2
Analysis	Yes	No	Yes