Reference no: EM132746187

Question - In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane. Joint processing costs up to the split-off point total $78,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: raw sugar, $39,000; brown sugar, $43,250; and white sugar, $49,500.

Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Product	Additional Processing Costs	Sales Value
Raw sugar	$41,445	$78,000
Brown sugar	$29,250	$74,875
White sugar	$30,350	$97,000

Required -

a. Compute the Incremental profit (loss) for each product.

b. Which product or products should be sold at the split-off point?

c. Which product or products should be processed further?