Example of further processing Decision

Example of further processing Decision

The basic rule for further processing decision is that when sale value minus further processing cost is more than sale value at split point then product is to be further processed.

Sale value at split point	100
Further processing cost	40
Sale value at finished stage	150
Units produced	100

Solution

Sale value	150
Less: further processing cost	40
	110
Sale value at split point	100
Decision	Further processing is feasible as per rule
Extra contribution per unit process	10
Total contribution	100 units x 10 = 1000