The Freed Corporation Produces Three Products, X, Y, Z, from a Single

question 157

Multiple Choice

The Freed Corporation produces three products, X, Y, Z, from a single raw material input. Product Y can be sold at the split-off point for total annual revenues of $50,000, or it can be processed further at a total annual cost of $16,000 and then sold for $68,000. Which of the following statements is true concerning Product Y?

• A) Product Y should be sold at the split-off point rather than processed further.
• B) The annual financial advantage from processing Product Y further is $18,000.
• C) The annual financial advantage from processing Product Y further is $68,000.
• D) The annual financial advantage from processing Product Y further is $2,000.

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Definitions:

Compounded Semiannually

The process of calculating interest where the accrued interest is added to the principal sum twice a year, resulting in interest being earned on previously earned interest.

Double Value

A term indicating that an item’s or asset's value has increased to twice its original value.

Compounded Quarterly

Interest calculation method where the interest earned is calculated and added to the principal four times a year.

Monthly Compounded

Interest calculation method where interest is added to the principal sum of a loan or deposit each month, leading to interest on interest.