What is the gross profit currently being earned

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Reference no: EM133072621

Question - Joint Cost - Cheyenne, Inc. produces three products from a common input. The joint costs for a typical quarter follow:

Direct materials $50,000

Direct labor 60,000

Overhead 65,000

The revenues from each product are as follows:

Product A $77,500

Product B 82,500

Product C 32,500

Management is considering processing Product A beyond the split-off point, which would increase the sales value of Product A to $116,000. However, to process Product A further means that the company must rent some special equipment costing $17,500 per quarter. Additional materials and labor also needed would cost $12,650 per quarter.

a. What is the gross profit currently being earned by the three products for one quarter?

b. What is the effect on quarterly profits if the company decides to process Product A further?

Reference no: EM133072621

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