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How justify whether product w converted into product w-one

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Reference no: EM132979394

Florist Sdn Bhd is considering a proposal to process product W further in Process 2 to create product W1. Product W1 is priced at RM15 per unit. Process 2 has enough spare capacity to complete this work. The additional processing in Process 2 would cost an additional RM12,000.

The following information is critical for the company to consider when deciding whether to convert product W to W1:

Joint product costs - RM200,000

Sales value at split-off point:

Product X (6,000 units at RM10 per unit) - RM60,000

Product W (6,000 units at RM12 per unit) - RM72,000

Required:

Problem 1: Justify whether product W can be converted into product W1 solely on the basis of financial considerations.

Reference no: EM132979394

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