Prosner Corp

question 56

Essay

Prosner Corp.manufactures three products from a common input in a joint processing operation.Joint processing costs up to the split-off point total $500,000 per year.The company allocates these costs to the joint products on the basis of their total sales value at the split-off point.
Each product may be sold at the split-off point or processed further.The additional processing costs and sales value after further processing for each product (on an annual basis)are:
Required:
Which product or products should be sold at the split-off point,and which product or products should be processed further? Show computations.

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Definitions:

Debit Balance

The remaining amount in a financial account that appears on the left side of the account ledger, indicating assets or expenses.

Dividends In Arrears

Outstanding dividends on cumulative preferred stock that have not been paid by the designated payment date.

Cumulative Preferred Stock

A type of preferred stock that entitles shareholders to receive dividends in arrears before any dividends can be distributed to common stockholders.

Guaranteed Dividends

Dividends that are promised by a corporation to preferred shareholders, payable before any dividends are given to common shareholders.