Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split-off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows. Sales Value and AdditionalCosts If Processed FurtherProductPoundsProduced Sales Value at Split-Off Final SalesValue AdditionalCostSea Tea9,000 $60,000 $90,000 $35,000 Sea Paste5,300 86,900 160,000 50,000 Sea Powder2,000 70,000 85,000 14,000 Required:a-1. Compute the incremental benefit (cost) of further processing to these products.a-2. Which products should Kelp process beyond the split-off point?b. What is the selling price per pound of Sea Paste at the split-off point at which the company is indifferent?

Every manufacturing unit has to spend some money to manufacture the product. Some products are made…

Answered: Kelp Company produces three joint…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter5: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 3CMA: Breegle Company produces three products (B-40, J-60, and H-102) from a single process. Breegle uses...

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Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split-off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows.

	Sales Value and Additional Costs If Processed Further
Product	Pounds Produced	Sales Value at Split-Off		Final Sales Value	Additional Cost
Sea Tea	9,000	$	60,000		$	90,000	$	35,000
Sea Paste	5,300		86,900			160,000		50,000
Sea Powder	2,000		70,000			85,000		14,000

Required:

a-1. Compute the incremental benefit (cost) of further processing to these products.

a-2. Which products should Kelp process beyond the split-off point?

b. What is the selling price per pound of Sea Paste at the split-off point at which the company is indifferent?

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