Payne Company Makes Two Products, M and N, in a Joint

Multiple Choice

Payne Company makes two products, M and N, in a joint process. At the split-off point, 40,000 units of M and 50,000 units of N are available each month. Monthly joint production costs are $270,000.
Product M can be sold at the split-off point for $4.20 per unit. Product N can either be sold at the split-off point for $3.20 per unit or it can be processed further and sold for $6.30 per unit. If N is processed further, additional processing costs of $2.50 per unit will be incurred.
-What would the selling price per unit of product N need to be after further processing in order for Payne Company to be economically indifferent between selling N at the split-off point or processing N further?

A) $8.70
B) $6.70
C) $7.20
D) $5.70