Reference no: EM132638647

A company manufactures three products using the same production process.

The costs incurred up to the split-off point are $200,000. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follows:

Question 1: Prepare an incremental analysis for the decision whether to sell or process materials further.

Product       Number of Units Produced Selling Price at Split-Off      Selling Price after Processing     Additional Processing Costs

A                   3,000                                                                             $10.00                                    $15.00
B                  6,000                                                                               11.60                                    16.20
C                  2,000                                                                                 19.40                                  21.60
                 $14,000                                                                                  16,000                                  9,000

Question 1: a. Determine which information is relevant to the decision on whether to process the products further. Explain why this information is relevant.

Question 1: b. Which product(s) should the company process further and which should it sell at the split-off point?