Bowen Company produces products P, Q, and R from a joint production process. Each product may be sold at the split-off point or be processed further. Joint production costs of $81,000 per year are allocated to the products based on the relative number of units produced. Data for Bowen's operations for the current year are as follows: Units ProducedAllocated Joint Production CostSales Value at Split-offProduct P 4,000 $28,000 $38,000 Product Q 7,000 $49,000 $47,000 Product R 2,000 $14,000 $16,000 Product P can be processed beyond the split-off point for an additional cost of $10,000 and can then be sold for $50,000. Product Q can be processed beyond the split-off point for an additional cost of $35,000 and can then be sold for $65,000. Product R can be processed beyond the
split-off point for an additional cost of $6,000 and can then be sold for $25,000.Required:Which products should be processed beyond the split-off point?
What will be an ideal response?
| Product P | Product Q | Product R | |||||||
| Sales value after further processing | $ | 50,000 | $ | 65,000 | $ | 25,000 | |||
| Sales value at split-off | 38,000 | 47,000 | 16,000 | ||||||
| Added sales value from processing | 12,000 | 18,000 | 9,000 | ||||||
| Added processing costs | 10,000 | 35,000 | 6,000 | ||||||
| Financial advantage (disadvantage) from further processing | $ | 2,000 | $ | (17,000) | ? | $ | 3,000 | ||
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