Answer: FINANCIAL DISADVANTAGE = $3,500
Explanation:
GIVEN the following;
PRODUCT X:
Allocated joint processing cost = $16,800
Sales Value at split off point = $24,000
Cost of further processing = $15,000
Sales value after further processing = $35,500
PRODUCT Y:
Allocated joint processing cost = $16,800
Sales Value at split off point = $24,000
Cost of further processing = $18,700
Sales Value after further processing = $45,100
The financial advantage or disadvantage is determined by comparing the sale value at split off point to the difference between the selling price after further processing and the cost of further processing of the product
To calculate the financial advantage (disadvantage) of product X :
Sale value of product X at split off point = $24,000
Benefit of further processing = (Sale value of product X after further processing - Cost of further processing product X)
$(35,500 - 15,000) = $20,500
FINANCIAL DISADVANTAGE = ( Sale value at split off > benefit of further processing )
$24,000 - $20,500 = $3500