Sell or Process Further, Basic Analysis
Shenista Inc. produces four products (Alpha, Beta, Gamma, andDelta) from a common input. The joint costs for a typical quarterfollow:
The revenues from each product are as follows: Alpha, $100,000;Beta, $93,000; Gamma, $30,000; and Delta, $40,000.
Management is considering processing Delta beyond the split-offpoint, which would increase the sales value of Delta to $75,000.However, to process Delta further means that the company must rentsome special equipment that costs $15,400 per quarter. Additionalmaterials and labor also needed will cost $8,500 per quarter.
Required:
1. What is the operating profit earned by thefour products for one quarter?$
2. Conceptual Connection: Should the divisionprocess Delta further or sell it at split-off?SelectThe company should process Delta furtherThe company shouldsell Delta at split-offItem 2
What is the effect of the decision on quarterly operatingprofit?
Gross profit would SelectincreasedecreaseItem 3 by $ .
Direct materials Direct labor $95,000 43,000 85,000 Show transcribed image text Direct materials Direct labor $95,000 43,000 85,000
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