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P7-57B The following information is for a company that produces four types of microprocessors using the same pro- duction process. The common costs of these products, up to the split-off point, are $550,000. Common costs are allocated based on the quantity of output. The following information includes additional processing costs, the selling price of each product at the split-off point, and the selling price of each product after further processing (SO 4) Prepare incremental analysis for the decision whether to sell or process materials further. Selling Price at Selling Price after Additional Costs for Microprocessor Uts Produced Split-Off Point Further Processing Further Processing Number of 3,000 4,000 2,500 500 $10.00 9.50 11.00 7.75 $15.00 12.25 15.70 10.25 $14,800 8,500 12,000 1,250 4 304 CHAPTER 7 Incremental Analysis Instructions a) Product 2 (a) Assuming only one product can be processed further, determine which one the company should choose. Briefly explain wh)y. (b) Referring to your answer in part (a), identify which information is relevant to the decision to process this product further (c) If common costs up to the split-off point were allocated on the basis of the market values at the split-off point, would your decision in part (a) be different? Briefly explain why (adapted from CGA-Canada, now CPA Canada)

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