Which product gf10 or gf20 would result in a net decrease

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Reference no: EM13482237

Grassy Fertilizer manufactures two lines of garden grade fertilizeras part of a joint production process: GF10 and GF20. Joint costsup to Grassy's split-off point total $85,000 per batch. Thesejoint costs are allocated to GF10 and GF20 in proportion to theirrelative sales values at the split-off point of $40,000 and$60,000, respectively.

Both lines of garden grade fertilizer can be further processed intocommercial grade fertilizer. The following table summarizes thecosts and revenue associated with additional processing of GF10 andGF20:

	Adaditional	Final Selling Price
	Processing	Batch of commercial
	Cost	Grade fertilizer
GF10	$18,000	$67,000
GF20	38,000	97,000

(a) The $85,000 in joint costs should be allocated to each productas follows:
GF10 $____________, GF20 $____________

(b) Which product (GF10 or GF20) would result in a net decrease inoperating income if processed into a commercial grade fertilizer?

(c) Which product (GF10 or GF20) would result in a net increase inoperating income if processed into a commercial grade fertilizer?

Reference no: EM13482237

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