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Jorioz Co makes joint products X and Y. $120,000 joint processing costs are incurred.
At the split-off point, 10,000 units of X and 9,000 units of Y are produced, with selling prices of $1.20 for X and $1.50 for Y.
The units of X could be processed further to make 8,000 units of product Z. The extra costs incurred in this process would be fixed costs of $1,600 and variable costs of $0.50 per unit of input.
The selling price of Z would be $2.25.
What would be the outcome if product X is further processed?
$600 loss
$400 Gain
$3900 gain
$1600 lossHi John, ive got this question on the Dec 16 pass paper Question 6, however im not sure how they’ve come to an answer of 600 loss, as the variable cost per unit of 0.50p a unit they have multiplied by 10000 units, whereas additional cost is only 8000 units
Please could you help on this
Thanks
In future you must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.
Although the only end up with 8,000 units of Z, they needed to input 10,000 units of X and the question says that the variable costs are $0.50 per unit of input (not of output).
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