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28 August, 07:52

Information about three joint products follows: X Y Z Anticipated production 12,000 lbs. 8,000 lbs. 7,000 lbs. Selling price/lb. at split-off $16 $26 $48 Additional processing costs/lb. after split-off (all variable) $8 $20 $20 Selling price/lb. after further processing $20 $40 $70 The cost of the joint process is $140,000. Which of the joint products should be processed further?

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  1. 28 August, 08:11
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    It is advisable to process Z unit further.

    Explanation:

    Ans: C. Z.

    Decision about further processing of Products

    Particulars / Products X Y Z

    Selling Price after further processing $ 20 $ 40 $ 70

    Less: Selling Price at split off $ 16 $ 26 $ 48

    Incremental value $ 4 $ 14 $ 22

    Less: Further Processing Cost $ 8 $ 20 $ 20

    Profit / (loss) arising due to further processing (a) ($ 4) ($ 6) $ 2

    Units (b) 12,000 8,000 7,000

    Increase / (Decrease) in Operational Income (a*b) ($ 48,000) ($ 48000) $ 14,000

    It is advisable to process Z unit further.
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