Lido Products Produces Two Products (A and B) from a Joint

question 86

Multiple Choice

Lido Products produces two products (A and B) from a joint process. The joint cost of production is $80 000. Five thousand units of Product A can be sold at split-off for $20 per unit or processed further at an additional cost of $20 000 and sold for $25 per unit. Ten thousand units of Product B can be sold at split-off for $15 per unit or processed further at an additional cost of $20 000 and sold for $16 per unit.
What is the difference in profit if Lido decides to process further Product A, instead of selling it at split-off?

• A) $25 000 increase
• B) $5000 increase
• C) $21 000 increase
• D) $27 000 decrease

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Definitions:

Firms

Business organizations or entities engaged in commercial, industrial, or professional activities, aiming to generate profits.

Resource Prices

The costs associated with acquiring the inputs or raw materials needed for production.

Firms

Business entities that produce goods or provide services, aiming to earn profits by meeting consumer needs.

Costs

Costs represent the monetary value of expenditures for inputs, labor, and other resources required to produce goods or services.