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Instructions
a. Prepare a per unit analysis of the differential costs. Briefly explain
whether Riggs should make or buy the sails.
b. If Riggs suddenly finds an opportunity to rent out the unused
capacity of its factory for $77,000 per year, would your answer to part
(a) change? Briefly explain.
E7-11
Kirk Minerals processes materials extracted from mines. The most
common raw material that it processes results in three joint products:
Spock, Uhura, and Sulu. Each of these products can be sold as is, or
each can be processed further and sold for a higher price. The
company incurs joint costs of $180,000 to process one batch of the raw
material that produces the three joint products. The following cost and
sales information is available for one batch of each product.
Sales Value at
Sales Value of
Split-Off Point
Process Further
Processed

Allocated Joint Costs Cost to

Product
Spock
$300,000

$210,000

$40,000

$110,000

Uhura
400,000

300,000

60,000

85,000

80,000

250,000

Sulu
800,000
Instructions

455,000