Asked by James Acsayan on May 12, 2024
Verified
What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
A) $31,800
B) $20,500
C) $16,800
D) $35,500
Split-off Point
The stage in a production process where joint products can be recognized as distinct products, each capable of being sold or processed further independently.
Product X
Product X represents a placeholder name for a generic product, used when the specific identity of the product is not disclosed or is hypothetical.
Minimum Amount
The smallest quantity or value permissible, often used in the context of financial transactions or requirements.
- Inspect the economic implications linked to the post-split-off extended processing of products.
Verified Answer
Net realizable value of Product X = Sales value at split-off point - Separable costs
Sales value at split-off point = $50,000/2 = $25,000 (since the total sales value is split equally between the two products)
Separable costs = Direct materials + Direct labor + Variable overhead = $7,500 + $8,000 + $9,000 = $24,500
Net realizable value of Product X = $25,000 - $24,500 = $500
Therefore, the company should accept a minimum amount of $500 for Product X at the split-off point. Among the options given, the closest amount is $20,500 (Option B).
The minimum amount the company should accept for Product X if it is to be sold at the split-off point is $20,500.Essay
Learning Objectives
- Inspect the economic implications linked to the post-split-off extended processing of products.
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