Dowchow Company Makes Two Products from a Common Input $\$ 38,400$

question 84

Multiple Choice

Dowchow Company makes two products from a common input. Joint processing costs up to the split-off point total $\$ 38,400$ a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:

$\begin{array}{|l|r|r|r|}\hline & \text { Product X } & \text { Product Y } & \text { Total } \\\hline \text { Allocated Joint Processing Costs } & 20,800 & 17,600 & 38,400 \\\hline \text { Sales Value at Split-Off Point } & 26,000 & 22,000 & 48,000 \\\hline \text { Costs of Further Processing } & 22,600 & 20,400 & 43,000 \\\hline \text { Sales Value after Further Processing } & 45,000 & 45,900 & 90,900 \\\hline\end{array}$
-What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?

• A) $20,800.
• B) $22,400.
• C) $43,400.
• D) $45,000.

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Definitions:

Promotion

Marketing strategies aimed at increasing the visibility, sales or acceptance of a product or service.

Monthly Compounded

The process of calculating interest each month and adding it to the total amount owed, thus earning interest on interest from the following month.

Semi-Annually Compounded

Describes the methodology of applying interest to a principal amount two times within a year.

Quarterly Payments

Payments made four times a year, typically for loans, mortgages, or other financial products.