Iaci Company Makes Two Products from a Common Input Required:

A) What Is the Net Monetary Advantage (Disadvantage)

question 125

Essay

Iaci Company makes two products from a common input.Joint processing costs up to the split-off point total $42,000 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:

$\begin{array}{llll}&\text { Product X} & \text { Product Y } & \text { Total }\\\text { Allocated joint processing costs } & \$ 22,400 & \$ 19,600 & \$ 42,000 \\\text { Sales value at split-off point } & \$ 32,000 & \$ 28,000 & \$ 60,000 \\\text { Costs of further processing } & \$ 11,600 & \$ 25,300 & \$ 36,900 \\\text { Sales value after further processing } & \$ 40,800 & \$ 54,200 & \$ 95,000\end{array}$


Required:

a) What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
b) What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
c) What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
d) What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off point?

---

Definitions:

Trusts

Trusts are legal arrangements through which assets are held by a trustee for the benefit of others, used for estate planning, to manage assets, and sometimes to reduce tax liabilities.

Market Power

The ability of a company to manipulate price by controlling supply or dominating the market.

Nineteenth Century

The period from January 1, 1801, through December 31, 1900, marked by significant industrial, cultural, and political changes worldwide.

Oligopoly

A market structure characterized by a small number of large firms that dominate the market, often leading to limited competition.