Forums › FIA Forums › MA2 Managing Costs and Finance Forums › further processing costs
- This topic has 1 reply, 2 voices, and was last updated 4 years ago by Ken Garrett.
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- July 15, 2020 at 9:11 am #576864
a firm operates a process from which two joint products (X and Y) result in equal weights.Product X can be processed further to produce an enhanced product Z.The following information has been tabulated.
JOINT PRODUCT ENHANCEMENT TABLE
X Y
Sales value per batch 250000 500000
Joint costs apportioned 280000 280000
profit/loss (30000) 220000
further processing of X to produce Z
revised sales value per batch further processing costs
300000 55000
Which of the following is correct decision?
a)re-work joint cost apportionment and do not produce Z
b)re-work joint cost apportionment and produce Z
c)undertake further processing to produce Z
d)do not undertake further processing of XJuly 15, 2020 at 1:31 pm #576886The apportionment of joint costs is always arbitrary, so reworking their division is pointless.
Making Z from X is worthwhile if the increase in revenue exceeds the additional costs incurred.
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