Paulsen Corporation Makes Two Products, W and P, in a Joint

question 135

Multiple Choice

Paulsen Corporation makes two products, W and P, in a joint process. At the split-off point, 50,000 units of W and 60,000 units of P are available each month. Monthly joint production costs are $290,000. Product W can be sold at the split-off point for $5.60 per unit. Product P either can be sold at the split-off point for $4.75 per unit or it can be further processed and sold for $7.20 per unit. If P is processed further, additional processing costs of $3.10 per unit will be incurred.
-If P is processed further and then sold, rather than being sold at the split-off point, the change in monthly net operating income would be a:

• A)$147,000 decrease
• B)$147,000 increase
• C)$39,000 increase
• D)$39,000 decrease

---

Definitions:

Layoff Avoidance

Strategies and actions taken by employers to prevent or reduce the need for reductions in the workforce.

Work Sharing

Reducing the number of hours employees work to avoid layoffs when there is a reduction in normal business activity.

Management Objectives

Specific goals set by a management team to guide the operations and direction of a company or organization.

Compressed Workweek

An alternative work schedule in which employees work fewer than the normal five days a week but still put in a normal number of hours per week.