Reference no: EM132813992

Question - Thorpe Industries produces chemicals for the swimming pool industry. In one joint process, 10 000 litres of XY are processed into 6 000 litres of X and 4 000 litres of Y. The cost of the joint process, including the XY, is $17 500. Thorpe allocates $11 800 of the joint cost to X and $5 700 of the cost to Y.

The 4 000 litres of Y can be sold at the split-off point for $3 500, or be processed further into a product called Z. The sales value of 4 000 litres of Z is $11 000, and the additional processing cost is $6 700.

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, $17 500, and the allocation of that cost to X and Y relevant to your decision made to answer Question (a)?

(d) Provide the reason(s) for your answer to Question (c).