[rsiddiqui]

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.

Concerning AM-12, which one of the following alternatives is most advantageous?

My question is why do you include joint cost in this when I thought joint cost wasn’t relevant for marginal analysis (specifically Selling or processing?). How does someone go about solving this?