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Fitzpatrick Corporation uses a joint manufacturing process in the production of two products, Gummo and Xylo. Each batch in the joint manufacturing process yields 5,000 pounds of an intermediate material, Valdene, at a cost of $20,000. Each batch of Gummo uses 60% of the Valdene and incurs $10,000 of separate costs. The resulting 3,000 pounds of Gummo sells for $10 per pound. The remaining Valdene is used in the production of Xylo which incurs $12,000 of separable costs per batch. Each batch of Xylo yields 2,000 pounds and sells for $12 per pound. Fitzpatrick uses the net realizable value method to allocate the joint material costs. The company is debating whether or not to process Xylo further into a new product, Zinten, which would incur an additional $4,000 in costs and sell for $15 per pound. If Zinten is produced, income would increase by
A. $2,000 per batch produced. B. $14,000 per batch produced. C. $5,760 per batch produced. D. $26,000 per batch produced. |