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Answer :
Certainly! Let's evaluate the financial implications of processing the products beyond the split-off point and determine the minimum price acceptable for Product X at the split-off point.
a. Financial advantage (disadvantage) of processing Product X beyond the split-off point:
1. Identify the sales value at the split-off point for Product X: This is [tex]$30,000$[/tex].
2. Determine the sales value after further processing of Product X: This is [tex]$47,000$[/tex].
3. Identify the cost of further processing Product X: This is [tex]$23,800$[/tex].
4. Calculate the financial impact: You subtract the sales value at the split-off point from the sales value after processing, then subtract the processing cost.
[tex]\[
\text{Financial Advantage for Product X} = \$47,000 - \$30,000 - \$23,800 = -\$6,800
\][/tex]
Conclusion: There is a disadvantage of processing Product X further of [tex]$6,800.
b. Financial advantage (disadvantage) of processing Product Y beyond the split-off point:
1. Identify the sales value at the split-off point for Product Y: This is $[/tex]20,000[tex]$.
2. Determine the sales value after further processing of Product Y: This is $[/tex]57,500[tex]$.
3. Identify the cost of further processing Product Y: This is $[/tex]18,100[tex]$.
4. Calculate the financial impact: Again, take the difference between the sales value after processing and the sales value at split-off, then subtract the processing cost.
\[
\text{Financial Advantage for Product Y} = \$[/tex]57,500 - \[tex]$20,000 - \$[/tex]18,100 = \[tex]$19,400
\]
Conclusion: There is an advantage of processing Product Y further of $[/tex]19,400.
c. Minimum amount the company should accept for Product X at the split-off point:
To find the minimum acceptable amount for Product X at the split-off point, consider the cost to process further and the expected sales value after processing.
1. Identify the cost of further processing Product X: [tex]$23,800$[/tex].
2. Determine the sales value after further processing of Product X: [tex]$47,000$[/tex].
3. Calculate the total of additional costs plus future value without losing benefit: Combine the processing cost with the lost revenue by not selling post-processing:
[tex]\[
\text{Minimum Acceptable Price} = \$23,800 + (\$47,000 - \$30,000) = \$40,800
\][/tex]
Thus, the minimum price that the company should accept to make it worthwhile to sell Product X at the split-off point is $40,800.
a. Financial advantage (disadvantage) of processing Product X beyond the split-off point:
1. Identify the sales value at the split-off point for Product X: This is [tex]$30,000$[/tex].
2. Determine the sales value after further processing of Product X: This is [tex]$47,000$[/tex].
3. Identify the cost of further processing Product X: This is [tex]$23,800$[/tex].
4. Calculate the financial impact: You subtract the sales value at the split-off point from the sales value after processing, then subtract the processing cost.
[tex]\[
\text{Financial Advantage for Product X} = \$47,000 - \$30,000 - \$23,800 = -\$6,800
\][/tex]
Conclusion: There is a disadvantage of processing Product X further of [tex]$6,800.
b. Financial advantage (disadvantage) of processing Product Y beyond the split-off point:
1. Identify the sales value at the split-off point for Product Y: This is $[/tex]20,000[tex]$.
2. Determine the sales value after further processing of Product Y: This is $[/tex]57,500[tex]$.
3. Identify the cost of further processing Product Y: This is $[/tex]18,100[tex]$.
4. Calculate the financial impact: Again, take the difference between the sales value after processing and the sales value at split-off, then subtract the processing cost.
\[
\text{Financial Advantage for Product Y} = \$[/tex]57,500 - \[tex]$20,000 - \$[/tex]18,100 = \[tex]$19,400
\]
Conclusion: There is an advantage of processing Product Y further of $[/tex]19,400.
c. Minimum amount the company should accept for Product X at the split-off point:
To find the minimum acceptable amount for Product X at the split-off point, consider the cost to process further and the expected sales value after processing.
1. Identify the cost of further processing Product X: [tex]$23,800$[/tex].
2. Determine the sales value after further processing of Product X: [tex]$47,000$[/tex].
3. Calculate the total of additional costs plus future value without losing benefit: Combine the processing cost with the lost revenue by not selling post-processing:
[tex]\[
\text{Minimum Acceptable Price} = \$23,800 + (\$47,000 - \$30,000) = \$40,800
\][/tex]
Thus, the minimum price that the company should accept to make it worthwhile to sell Product X at the split-off point is $40,800.
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