Elco Oil Products Manufactures Three Joint Products: Phase 1, Phase

Essay

Elco Oil Products manufactures three joint products: Phase 1, Phase 2, and Phase 3. The cost of the joint process is $30,000. Information about the three products follows: $$\begin{array} { l r r r } & \text { Phase } 1 & \text { Phase } 2 & \text { Phase } 3 \\\text { Anticipated production } & 5,600 \mathrm{~kg} & 10,000 \mathrm{~kg} & 2,500 \mathrm{~kg} \\\text { Selling price/kg at split-off } & \$ 2.00 & \$ 1.00 & \$ 3.00 \\\text { Additional processing costs/kg after split-off } & & & \\\quad \text { (all variable) } & \$ 1.50 & \$ 1.25 & \$ .75 \\\text { Selling price/kg after further processing } & \$ 2.50 & \$ 3.75 & \$ 6.25 \\\text { Allocated joint costs } & \$ 12,000 & \$ 10,500 & \$ 7,500\end{array}$$ Required:
A. Determine whether each product should be sold at split-off or processed further.
B. Determine the firm's income if the firm processes all three products beyond split-off.