A Joint Production Process at Sunnybrook Farms Results in Two

question 48

Multiple Choice

A joint production process at Sunnybrook Farms results in two products,strawberry syrup and strawberry jam.The following cost and activity data relate to these two products: $\begin{array}{|l|c|c|}\hline &\text { Strawberry syrup}&\text { Strawberry jam}\\\hline \text { Joint costs allocated } & \$ 8,000 & 4,000 \\\hline \text { Number of units produced from joint process } & 2,000 & 2,000 \\\hline \text { Selling price at split-off point } & \$ 2.50 & \$ 1.75 \\\hline \text { Selling price after processing further } & \$ 5.00 & \$ 2.00 \\\hline \text { Cost of processing further } & \$ 3,000 & \$ 2,000 \\\hline\end{array}$
Strawberry syrup can be sold as-is (at the split-off point) for $2.50 per unit,or it can be process further into a specialty strawberry juice and then sold for $5.00 per unit.If strawberry syrup is processed further into the specialty strawberry juice,what would be the overall effect on operating income?

• A)$5,000 net increase in operating income
• B)$5,000 net decrease in operating income
• C)$2,000 net increase in operating income
• D)$2,000 net decrease in operating income

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