The Carter Corporation makes products A and B in a joint process from a single input, R. During a typical production run, 50,000 units of R yield 20,000 units of A and 30,000 units of B at the split-off point. Joint production costs total $90,000 per production run. The unit selling price for A is $4.00 and for B is $3.80 at the split-off point. However, B can be processed further at a total cost of $60,000 and then sold for $7.00 per unit. If product B is processed beyond the split-off point, the financial advantage (disadvantage) as compared to selling B at the split-off point would be:

$36,000 per production run

Explanation:

Calculation to determine what the financial advantage (disadvantage) as compared to selling B at the split-off point would be:

Sell at split off Process further Difference

Selling price $3.8 $7

Units 30,000 30,000

(A units 50,000-20,000=30,000)

(B units 30,000)

Sales revenue$114,000 $210,000

($3.8*30,000=$114,000)

($7*30,000=$210,000)

Less Cost upto split off $54,000 $54,000

($114,000-$60,000=$54,000)

Further process cost $0 $60,000

Net income $60,000 $96,000 $36,000

($114,000-$54,000=$60,000)

($210,000-$54,000+$60,000=$96,000)

($60,000-$96,000=$36,000)

Therefore the financial advantage (disadvantage) as compared to selling B at the split-off point would be:$36,000

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