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 B, instead of selling it at split-off?

A) $10 000 increase
B) $20 000 increase
C) $10 000 decrease
D) $58 000 decrease

Question

Zybrea Knight · Accepted Answer

Final Answer : C, Explanation :  Selling Product B at split-off would yield $15 * 10,000 = $150,000. Processing further costs an additional $20,000 and would sell for $16 * 10,000 = $160,000. The net gain from processing further is $160,000 - $150,000 - $20,000 = -$10,000, indicating a decrease in profit.

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