Reference no: EM132560390

Babylon Corporation processes 3 materials extracted from natural sources. The most common raw material results in three joint products: Larco, Marco, and Narco.

Each of these products can be sold as is, or each can be processed further and sold for a higher price. The company incurs joint costs of $180,000 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product.

	Sales Value at Split-Off point	Allocated Joint Costs	Cost to Process Further	Sales Value of Processed Product
Larco	5200,000	540,000	5100,000	5330,000
Marco	300,000	60,000	125,000	400,000
Narco	400,000	80,000	150,000	600,000

Question a.) Which costs and revenues should be taken into consideration while deciding on whether each of the three joint products should be sold as is, or processed further?

Question b.) What would be your decision on selling at the split-off point or processing further for those three products? Show calculations.