Two products, QI and VH, emerge from a joint process. Product QI has been allocated $9,600 of the total joint costs of $12,000. A total of 9,000 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $13 per unit, or it can be processed further for an additional total cost of $54,000 and then sold for $18 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point?

By processing QI further, there would a net disadvantage of $9000

Explanation:

In order to determine the financial advantage of processing further product QI, a net incremental benefit approach could be used, which means that we compare the additional revenue from further processing versus the additional cost of further processing to ascertain whether further processing of QI after split-off point is desirable

Additional revenue =($18-$13)*9000

                                 =$45000

Further processing cost =$54,000

Net increment benefit=$45000-$54,000

                                    =-$9,000

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