Question :
Roper Corporation produces three identifiable product lines, Products A, B, and C, from a basic processing operation. The cost of the basic operation is $320,000 for a yield of 5,000 tons of Product A; 2,000 tons of Product B; and 1,000 tons of Product C. The basic processing cost is divided to the product lines in proportion to the relative weight produced.
Roper Corporation does both the necessary processing work and the further refinement of the three product lines. After the necessary operation, the products will be sold at the subsequent prices per metric ton:
Product A-$60
Product B-$53
Product C-$35
Costs to refine all of the three product lines given below:
Product Lines
A B C
Variable cost per metric ton $8 $7 $4
Total fixed cost $20,000 $16,000 $6,000 9
The fixed cost of the refining operation will not be incurred if the product line is not refined. The refined products will be sold at the given prices per metric ton:
Product A-$75
Product B-$65
Product C-$40
Required:
a) Evaluate the total unit cost of each product line in a refined state.
b) Which of the three product lines, if any, should be developed and which should be sold after the basic processing operation? Show Evaluation.