[basjon]

Further processing and joint cost:
DTS is another subsidiary of the JTX Group that uses a common process to manufacture three joint products: A, B and C. The costs of operating the common process total $829 400 each month. This includes $74 800 of apportioned head office costs. The remaining costs are specific to the common process and would be avoided if it were discontinued. Common costs are apportioned to the joint products on the basis of their respective output volumes.

The normal monthly output from the common process is 4 000 litres of A, 5 000 litres of B and 4 500 litres of C.

There are a number of manufacturers of products that are identical to products A, B and C and as a result there is a competitive market in which these products can be bought and sold at $60 per litre for A, $54 per litre for B and $66 per litre for C.

Currently DTS uses the output from the common process as input to three separate processes where A, B and C are converted into AZ, BZ and CZ. The specific costs of these further processes (which are avoidable if the further process is discontinued) are as follows:

A to AZ $15 per litre plus $22 200 per month
B to BZ $21.60 per litre plus $9 600 per month
C to CZ $18.60 per litre plus $28 800 per month

The market selling prices of the further processed products are $81 per litre for AZ, $90 per litre for BZ and $86.40 per litre for C.
Required: Advise DTS as to which of the further processes should continue to be operated.