Davidian Company Uses a Joint Process to Produce Products W

question 94

Multiple Choice

Davidian Company uses a joint process to produce products W, X, Y, and Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are $120,000. Other relevant data are as follows: $$\begin{array} { r r r } \text { Product }&\begin{array} { c } \text { Sales Value } \\\text { at Split-Off }\end{array} & \begin{array} { r } \text { Additional } \\\text { Processing Costs }\end{array} & \begin{array} { r } \text { Sales Value of } \\\text { Final Froduct }\end{array} \\\hline W&\$ 40,000 & \$ 60,000 & \$ 80,000 \\X&\$ 12,000 & \$ 4,000 & \$ 20,000 \\Y&\$ 20,000 & \$ 32,000 & \$ 120,000 \\Z&\$ 28,000 & \$ 20,000 & \$ 32,000 \\&\$ 100,000 & \$ 116,000 & \$ 252,000\end{array}$$
Processing Y further will cause profits to

• A)increase by $68,000.
• B)increase by $52,000.
• C)decrease by $32,000.
• D)increase by $120,000.

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Definitions:

Wickard V. Filburn

A landmark 1942 Supreme Court case that greatly expanded the power of the federal government to regulate economic activity under the Commerce Clause.

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