Faulk Company Has a Joint Process Which Produces Three Products

question 78

Essay

Faulk Company has a joint process which produces three products, AA, BB, and CC. Each product may be sold at split- off or processed further and then sold. Joint processing costs for a year amount to $30,000. Other relevant data are as follows: $\begin{array}{llll}&&\text { Separable }\\&&\text { Processing }\\\text { Product } & \begin{array}{l}\text { Sales Value at } \\\text { Split-off }\end{array} & \begin{array}{l}\text { Costs after } \\\text { Split-off }\end{array} & \begin{array}{l}\text { Sales Value at } \\\text { Completion }\end{array}\\\text { AA } & \$ 15,500 & \$ 2,200 & \$ 17,700 \\\text { BB } & 18,000 & 8,000 & 23,000 \\\text { CC } & 24,000 & 11,500 & 37,500\end{array}$ 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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Definitions:

Altruism

The selfless concern for the well-being of others, often leading to acts of kindness without expectation of reward.

Ethical Egoism

A moral philosophy suggesting that actions are morally right if they benefit the self of the individual performing them.

Abraham Lincoln

The 16th President of the United States, known for leading the country during the Civil War and abolishing slavery.

Choices

The act of selecting between two or more possibilities and the mental process of judging the merits of multiple options.