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A manufacturing company manufactures two joint products, cp1 and cp2, in a common process. These products can be sold at the split-off point in an external market, or processed further in separate processes to produce products fp1 and fp2. Details of these processes
For fp1:Input 10000 kg. Common process loss 5% of input.Cp1 5500 kg. Further process loss 10% of input
For fp2: input 10000 kg. Common process loss 5% of input. Cp2 4000kg. Further process loss 5% of input.
Cp1 has a market price of 6 per kg and cp2 has a market price of 5 per kg. Relevant further processing costs are 2 per input kg in the process to manufacture fp1 and 3 per input kg in the process to make fp2. Both fp1 and fp2 sell for 9 per kg.
For each 10000 kg input to the common process, how much additional profit is obtained by further processing each of the joint products instead of selling them at the split-off point?
I got the answer of 4450. Where have I went wrong.
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