Iaci Company Makes Two Products from a Common Input

question 161

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: 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?

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Definitions:

Revenue Centre Manager

An individual responsible for overseeing a business unit or division that is focused on generating revenue, without direct control over costs or investment decisions.

Gross Margin

A company's revenue minus its cost of goods sold, expressed as a percentage of revenues, indicating the efficiency of production and sales.

Transfer Price

The price at which goods and services are sold between divisions within the same company, used for internal sales and profit allocation.

Variable Cost

Costs that change in proportion to the goods or services that a business produces.