Problem 5. Sell-as-is or process further a product-2.Hurricane Corporation produces three products at segregation point, Poh, Taeh, and Toh.These products could be processed further then later sold at higher sales value. Thetotal joint cost in manufacturing these three products was P3 million. The data belowwere made available by the accounting and production personnel:Taeh40,000 unitsP 100Poh10,000 unitsP 8090Toh50,000 unitsP 200Production and salesUnit sales price at split-off point12018Unit sales price after further processingUnit variable costs of subsequent processIf product Poh is processed further, an equipment shall be rented at a cost of P12,000. Toprocess further product Taeh an outside contractor will be engaged for an amount ofP90,000 because the company has no available space and manpower for its subsequentprocessing. Product Toh could be subsequently processed by using idle machine andmanpower time within the company. The total set-up cost of subsequently processingproduct Toh is P120,000.Required:1. Which product should be processed further to maximize profit?2. To maximize profit, what is the minimum sales price for product Kah that should beset after it is processed further?230

If products are sold at split of point Particulars poh Taeh Toh Sales in units…

Answered: Which product should be processed…

Business

Accounting

Which product should be processed further to maximize profit?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Problem 5. Sell-as-is or process further a product-2.
Hurricane Corporation produces three products at segregation point, Poh, Taeh, and Toh.
These products could be processed further then later sold at higher sales value. The
total joint cost in manufacturing these three products was P3 million. The data below
were made available by the accounting and production personnel:
Taeh
40,000 units
P 100
Poh
10,000 units
P 80
90
Toh
50,000 units
P 200
Production and sales
Unit sales price at split-off point
120
18
Unit sales price after further processing
Unit variable costs of subsequent process
If product Poh is processed further, an equipment shall be rented at a cost of P12,000. To
process further product Taeh an outside contractor will be engaged for an amount of
P90,000 because the company has no available space and manpower for its subsequent
processing. Product Toh could be subsequently processed by using idle machine and
manpower time within the company. The total set-up cost of subsequently processing
product Toh is P120,000.
Required:
1. Which product should be processed further to maximize profit?
2. To maximize profit, what is the minimum sales price for product Kah that should be
set after it is processed further?
230

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