CAF-5 · Chapter 8 · Question 8 of 10
Product X is a joint product that can be sold at the split-off point for Rs. 50 per unit. Alternatively, it can be processed further at an additional cost of Rs. 15 per unit and then sold for Rs. 70 per unit. What is the incremental profit or loss per unit from further processing?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 5 per unit profit
Explanation
Incremental Revenue = Final Sales Price (Rs. 70) - Sales Price at split-off (Rs. 50) = Rs. 20. Incremental Cost = Further processing cost = Rs. 15. Incremental Profit = Incremental Revenue (Rs. 20) - Incremental Cost (Rs. 15) = Rs. 5 profit per unit. Therefore, it should be processed further.
More Joint and By-Product Costing MCQs
- Q10What is the fundamental nature of "Joint Costs" prior to the split-off point?
- Q1In a manufacturing process where multiple products are produced from a single raw material, what is the term used to describe the exact…
- Q2Which of the following is the primary distinguishing factor between a "Joint Product" and a "By-Product"?
- Q3When a by-product is generated in a joint process and it has a measurable net realizable value (NRV), what is the most common accounting…
- Q4Which of the following is NOT a recognized method for allocating joint costs to joint products at the split-off point?