Reference no: EM132603700

Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $47,000 a year. The company allocates these costs to the joint products on the basis of their total 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 X                    Product Y                        Total

Allocated joint processing costs                       $18,800                    $28,200                          $47,000

Sales value at split-off point                                $20,000                  $30,000                             $50,000

Costs of further processing                               $24,500                      $18,800                           $43,300

Sales value after further processing                   $38,400                          $58,900                       $97,300

Required:

Question a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.)

Question b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point?

Question c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?

Question d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?