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IMANET CMA Exam - Topic 6 Question 78 Discussion
Topic #: 6
N-Air Corporation uses a joint process to produce three products: A, B, and C, all derived from one input. The company can sell these . products at the point of split-off (end of the joint process) or process them further. The joint production costs during October were $10,000. N-Air allocates joint costs to the products in proportion to the relative physical volume of output. Additional information is presented in the opposite column.
Assuming that all products were sold at the split-off point during October, the gross profit from the production process would be
The estimated incremental after-tax operating cash flows for each year of a capital project consist of two components: the after-tax cash inflows from operations and the depreciation tax shield arising from me purchase of new equipment. The first of these for Pelican can be calculated as follows:
Pelican's total incremental after-tax operating cash flows for each year of the project's
life is thus $106,000 ($90,000 + $16,000).
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