wexpro, incorporated, produces several products from processing 1 ton of clypton, a rare mineral. material and processing costs total $63,000 per ton, one-fourth of which is allocated to product x15. eight thousand two hundred units of product x15 are produced from each ton of clypton. the units can either be sold at the split-off point for $16 each, or processed further at a total cost of $9,000 and then sold for $19 each. required: 1. what is the financial advantage (disadvantage) of further processing product x15?

Respuesta :

The financial advantage of further processing product X15 is $15100.

Incremental benefit from further processing product X15 = Incremental sales - Incremental processing costs

= {($19 per unit - $16 per unit) *8300 units}- $9800

= $24900 - $9800

= $15100

Incremental sales mean the difference between sales value after further processing and sales value at the split-off point.  

Incremental sales are the earnings gain or loss related to a given managerial choice. general income will increase as long as incremental profit is high-quality. when incremental sales are bad, overall income declines. similarly, incremental income is tremendous (and total earnings increases) if the incremental sales associated with a decision exceed the incremental fee. The incremental idea is so intuitively obvious that it is easy to overlook each of its significance in managerial selection-making and the ability for trouble in effectively applying it.

The company might forego $5000 in income with the aid of turning down the offer to sublet the excess warehouse area. similarly, any company that adds a standard allotted price for constant costs and overhead to the proper incremental sales of production runs the risk of turning down the worthwhile enterprise.

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