Roper Corporation manufactures 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 allocated to the product lines in proportion to the relative weight produced.
Roper Corporation does both the basic processing work and the further refinement of the three product lines. After the basic operation, the products can be sold at the following prices per
metric ton:
Product A-$60
Product B-$53
Product C-$35
Costs to refine each of the three product lines follow:
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 can be sold at the following prices per metric ton:
Product A-$75
Product B-$65
Product C-$40
Required:
a) Determine the total unit cost of each product line in a refined state.
b) Which of the three product lines, if any, should be refined and which should be sold after the
basic processing operation? Show computations.