2. Arapahoe Corp. can make three products from a joint process.

The monthly cost of the joint process is $10,000.

Following are data about the three products.

Sales Value Sales Value Costs of

at if Further Additional
Product Split-off Point Processed Processing
------- --------------- ----------- ----------
A $ 8,000 $12,000 $2,500
B $ 9,000 $10,000 $2,000
C $ 0 $ 2,500 $1,000

a. Which product(s) should be sold at the split-off point?

b. Arapahoe is currently processing all three products rather than selling any of them at the split-off point. Find its
current income.

SOLUTION:

a. Product B should be sold at split-off.

b. Income: $9,000 ($12,000 + $10,000 + $2,500 - $2,500 - $2,000 - $1,000 - $10,000)