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Should Y be sold at the split-off point or processed further

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Reference no: EM132765767

Question - Thorpe industries produces chemicals for the swimming pool industry.

In one joint process, 10,000 litres of XY are processed into 6000 litres of X and 4000 litres of Y. The cost of the joint process, including the XY, is $17500. Thorpe allocates $11800 of the joint cost of X and $5700 of the cost to Y.

The 4000 litres of Y can be sold

At the split-off point for $3500, or be processed further into a product called Z. The sales value of 4000 litres of Z is $11000, and the additional processing cost is $6700.

Required -

a) Should Y be sold at the split-off point or processed further?

b) Provide the reason(S) for your answer to Question (a).

c) Are the cost of the joint process, $17500, and the allocation of that cost to X and Y relevant to your decision made to answer Question (a)?

(d) Provide the reasons for your answer to question (c).

Reference no: EM132765767

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