Sell or process-further decision: The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue. Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing. If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point. To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

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Answer 1

Question

Chapter 7, Problem 7.12E

(a)

To determine

Sell or process-further decision:

The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.

Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.

If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.

To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

(b)

To determine

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

(c)

To determine

Decision-making process:

Decision making can be defined as the process of making choices through the identification of a decision, collecting information, and assessing alternative resolutions. The implementation of a step-by-step process of decision making helps in making deliberate and effective decisions through proper organization of relevant information and defining alternatives.

To Explain: Whether the decision would be different if the company was using the quantity of output to allocate the joint costs.

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The Freed Company produces three products, X, Y, Z, from a single raw material input. Product Y can be sold at the split-off point for total revenues of $50,000, or it can be processed further at a total cost of $16,000 and then sold for $68,000. Product Y: А. Should be sold at the split-off point, rather than processed further. В. Would increase the company's overall net operating income by $18,000 if processed further and then sold. С. Would increase the company's overall net operating income by $68,000 if processed further and then sold. D. Would increase the company's overall net operating income by $2,000 if processed further and then sold. Е. None of the above

The internal manufacturing cost per unit of a component is as follows – Direct Material $5.00 Direct Labour $10.00 Fixed costs $15.00 Total costs $30.00 (a) Given the information above, if the company buys the component, it would however have to pay $17.00, but would still have to meet its fixed cost. Should the company make or buy the component? (b) Based on your answer in (a) above name two factors that can influence the company to buy the product. 2. (a) Describe two (2) methods for allocating support costs to departments. (b) Explain why support costs are allocated to departments. Please answer question 2 thank you very much.

The internal manufacturing cost per unit of a component is as follows – Direct Material $5.00 Direct Labour $10.00 Fixed costs $15.00 Total costs $30.00 (a) Given the information above, if the company buys the component, it would however have to pay $17.00, but would still have to meet its fixed cost. Should the company make or buy the component? (b) Based on your answer in (a) above name two factors that can influence the company to buy the product. 2. (a) Describe two (2) methods for allocating support costs to departments. (b) Explain why support costs are allocated to departments.

Answer 2

Question

Chapter 7, Problem 7.12E

(a)

To determine

Sell or process-further decision:

The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.

Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.

If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.

To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

(b)

To determine

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

(c)

To determine

Decision-making process:

Decision making can be defined as the process of making choices through the identification of a decision, collecting information, and assessing alternative resolutions. The implementation of a step-by-step process of decision making helps in making deliberate and effective decisions through proper organization of relevant information and defining alternatives.

To Explain: Whether the decision would be different if the company was using the quantity of output to allocate the joint costs.

Expert Solution & Answer

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Answer 3

Question

Chapter 7, Problem 7.12E

(a)

To determine

Sell or process-further decision:

The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.

Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.

If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.

To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

(b)

To determine

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

(c)

To determine

Decision-making process:

Decision making can be defined as the process of making choices through the identification of a decision, collecting information, and assessing alternative resolutions. The implementation of a step-by-step process of decision making helps in making deliberate and effective decisions through proper organization of relevant information and defining alternatives.

To Explain: Whether the decision would be different if the company was using the quantity of output to allocate the joint costs.

Expert Solution & Answer

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Answer 4

Question

Chapter 7, Problem 7.12E

(a)

To determine

Sell or process-further decision:

The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.

Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.

If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.

To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

(b)

To determine

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

(c)

To determine

Decision-making process:

Decision making can be defined as the process of making choices through the identification of a decision, collecting information, and assessing alternative resolutions. The implementation of a step-by-step process of decision making helps in making deliberate and effective decisions through proper organization of relevant information and defining alternatives.

To Explain: Whether the decision would be different if the company was using the quantity of output to allocate the joint costs.

Expert Solution & Answer

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Answer 5

Chapter 7, Problem 7.12E

(a)

To determine

Sell or process-further decision:

The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.

Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.

If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.

To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

(b)

To determine

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

(c)

To determine

Decision-making process:

Decision making can be defined as the process of making choices through the identification of a decision, collecting information, and assessing alternative resolutions. The implementation of a step-by-step process of decision making helps in making deliberate and effective decisions through proper organization of relevant information and defining alternatives.

To Explain: Whether the decision would be different if the company was using the quantity of output to allocate the joint costs.

Answer 6

Chapter 7, Problem 7.12E

(a)

To determine

Sell or process-further decision:

The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.

Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.

If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.

To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

Answer 7

Chapter 7, Problem 7.12E

(a)

To determine

Sell or process-further decision:

The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.

Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.

If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.

To explain: The information relevant to the decision on whether to further process the products or not, and the reason behind it.

Answer 8

(b)

To determine

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

Answer 9

(b)

To determine

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

Answer 10

(c)

To determine

Decision-making process:

Decision making can be defined as the process of making choices through the identification of a decision, collecting information, and assessing alternative resolutions. The implementation of a step-by-step process of decision making helps in making deliberate and effective decisions through proper organization of relevant information and defining alternatives.

To Explain: Whether the decision would be different if the company was using the quantity of output to allocate the joint costs.

Answer 11

(c)

To determine

Decision-making process:

Decision making can be defined as the process of making choices through the identification of a decision, collecting information, and assessing alternative resolutions. The implementation of a step-by-step process of decision making helps in making deliberate and effective decisions through proper organization of relevant information and defining alternatives.

To Explain: Whether the decision would be different if the company was using the quantity of output to allocate the joint costs.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2Q Ch. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6Q Ch. 7 - Prob. 7Q Ch. 7 - Prob. 8Q Ch. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q

Solution Summary: The author explains the purpose of sell or process-further decision: to choose an appropriate alternative that maximizes the operating income. Incremental revenue refers to the difference in the total revenue earned when the product or service is sold

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.

Want to see the full answer?

Chapter 7 Solutions

Solution Summary: The author explains the purpose of sell or process-further decision: to choose an appropriate alternative that maximizes the operating income. Incremental revenue refers to the difference in the total revenue earned when the product or service is sold

Split-off Point: Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products. To determine: The products to be processed further, and the products to be sold at the split-off point.

Want to see the full answer?

Chapter 7 Solutions

Split-off Point:

Split-off point is referred to as the point at which the joint products will become individually identifiable as the separate products.

To determine: The products to be processed further, and the products to be sold at the split-off point.