Buchanan Corporation manufactures two products in a joint process incurring $150,000 of joint costs per batch that are allocated using the physical-me... Accounting MCQs | Accounting MCQs

Buchanan Corporation manufactures two products in a joint process incurring $150,000 of joint costs per batch that are allocated using the physical-measure method. Each batch yields 1,000 units of Product A and 4,000 units of Product B. Separable costs are $20,000 for Product A and $20,000 for Product B. Both products sell for $50 per unit. Buchanan has the option of processing Product B further to produce 4,000 units of Product C, incurring additional costs of $8,000. Buchanan should produce Product C if the selling price per unit is greater than

$57$52$37$32Show Result

Correct - Your answer is correct.

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Detailed Answer

Answer (B) is correct. The unit price of Product B is known to be $50.00. The additional unit cost of further processing is $2.00 ($8,000 ÷ 4,000 units). Consequently, the unit price must be at least $52.00 ($50.00 opportunity cost + $2.00).