A Joint Production Process at Happy Days Farms Results in Two

question 148

Multiple Choice

A joint production process at Happy Days Farms results in two products,blackberry syrup and blackberry jam.The following cost and activity data relate to these two products:

Blackberry syrup can be sold as-is (at the split-off point) for $2.50 per unit,or it can be processed further into a specialty blackberry juice and then sold for $5.00 per unit.If blackberry syrup is processed further into the specialty blackberry juice,what would be the overall effect on operating income?

• A)$1,750 net increase in operating income
• B)$1,750 net decrease in operating income
• C)$3,750 net increase in operating income
• D)$3,750 net decrease in operating income

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Definitions:

Breaking Even

The point at which total revenues exactly equal total expenses, resulting in no net profit or loss.

Produce

To create or manufacture goods and services for consumer use, often involving a combination of raw materials, labor, and machinery.

Leave the Industry

The process by which firms exit a market or cease operations, often due to unfavorable market conditions or insufficient profits.

Average Variable Cost

The total variable cost divided by the quantity of output produced, representing the variable cost per unit of output.