What would be the overall effect on operating income

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Question - A joint production process at Sunny Brooks Dairy results in two products, cherry jelly and cherry jam. The following cost and activity data relate to these two products:

 

Cherry jelly

Cherry jam

Joint costs allocated

$10,000

$12,000

Number of units produced from joint process

2,000

2,000

Selling price at split-off point

$2.50

$1.75

Selling price after processing further

$5.00

$2.00

Cost of processing further

$2,200

$2,000

Cherry jelly can be sold as - is (at the split - off point) for $2.50 per unit, or it can be processed further into a specialty cherry smoothie and then sold for $5.00 per unit. If cherry jelly is processed further into the specialty cherry smoothie, what would be the overall effect on operating income?

A) $5,000 net increase in operating income

B) $2,800 net decrease in operating income

C) $5,000 net decrease in operating income

D) $2,800 net increase in operating income

Reference no: EM131697740

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