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Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
Problem 13-47Â Â Â Â Â Â Â Â Sell or Process Further, Basic Analysis
Shenista Inc. produces four products (Alpha, Beta, Gamma, and Delta) from a common input. The joint costs for a typical quarter follow:
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|
Direct materials |
$95,000 |
|
Direct labor |
43,000 |
|
Overhead |
85,000 |
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The revenues from each product are as follows: Alpha, $100,000; Beta, $93,000; Gamma,
$30,000; and Delta, $40,000.
Management is considering processing Delta beyond the split-off point, which  would increase the sales value of Delta to $75,000. However, to process Delta further means that the company must rent some special equipment that costs $15,400 per quarter. Additional materials and labor also needed will cost $8,500 per quarter.
Required:
1.      What is the operating profit earned by the four products for one quarter?
2.      CONCEPTUAL CONNECTION Should the division process Delta further or sell it at split- off? What is the effect of the decision on quarterly operating profit?
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