Winnovia Mills processes cotton in a joint process that yields two joint products: fabric and yarn. May's joint cost is $120,000, and the sales values at split-off are $360,000 for fabric and $300,000 for yarn. If the products are processed beyond split-off, the final sales value will be $540,000 for fabric and $420,000 for yarn. Additional costs of processing are expected to be $120,000 for fabric and $102,000 for yarn.
a. Should the products be processed further? Show computations.
b. Were any revenues and/or costs irrelevant to the decision? If so, what were they and why were they irrelevant?
This question was answered on: Jul 11, 2017
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