June 10. I am still working on Ch 2 didnt really have time to study for the past few days since I was preparing for my exams for my classes.
I got a question.
Whitehall Corporation produces chemicals used in the cleaning industry. During the previous month Whitehall incurred $300,000 of joint costs in producing 60,000 units of AM-12 and 40,000 units of BM-36. Whitehall uses the units-of-production method to allocate joint costs. Currently, AM-12 is sold at split-off for $3.50 per unit. Flank Corporation has approached Whitehall to purchase all of the production of AM-12 after further processing. The further processing will cost Whitehall $90,000.
a.
Whitehall should process further and sell to Flank if the total selling price per unit after further processing is greater than $5.00.
b.
Whitehall should continue to sell at split-off unless Flank offers at least $4.50 per unit after further processing, which covers Whitehall's total costs.
c.
Whitehall should process further and sell to Flank if the total selling price per unit after further processing is greater than $3.00, which covers the joint costs.
d.
Whitehall should process further and sell to Flank if the total selling price per unit after further processing is greater than $1.50, which covers the incremental costs.
So I got the right answer but I am not understanding Becker's explanation (as usual). I got $5.00 because the additional cost (90,000/60,000 units =1.5 per) 1.5 + 3.5 (current cost) = 5.
I am not sure if this is the proper way to approach the problem and would like others to explain in a different way.
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