Reference no: EM132559295

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                  $200,000                        $40,000                           $100,000                              $330,000

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.