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further processing costs

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.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • July 15, 2020 at 9:11 am #576864
    beticopper
    Participant
    • Topics: 69
    • Replies: 13
    • ☆☆

    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 X

    July 15, 2020 at 1:31 pm #576886
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10595
    • ☆☆☆☆☆

    The 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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