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(Solved) (Latest ver. Aug 2020) - Operating income, processing products further

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Question:

Faulk Company has a joint process, which produces three products, X, Y, and Z. Each product may be sold at spli-'off or processed further and then sold. Joint processing costs for a year amount to $30,000. Other relevant data are as follows:

Separable
Processing
Sales Value Costs after Sales Value
Product at Split-off Split-off at Completion
X $15,500 $2,200 $17,700
Y 18,000 8,000 23,000
Z 24,000 11,500 37,500

Required:

a. What will be the effect on profits of processing each product further?

b. Assume the company maximizes profits, what is Faulk Company's operating income?

 







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