Relevant Approach

Price Quantity Revenue

Price if processed further 110 1800 198000
Price at split of 70 2000 140000
Incremental revenue from processing further 58000
Less: Additional Processing Cost 110000
Loss from further processing -52000

Total Approach
Studs 6 82000 492000
Decorative pieces 110 1800 198000
Posts 16 18000 288000
Total sales 978000
Joint cost 1020000
Net loss -42000
Less: Additional Processing Cost -110000
Net loss -152000

Studs 6 82000 492000

Decorative pieces 70 2000 140000
Posts 16 18000 288000
Total sales 920000
Joint cost 1020000
Net loss -100000

Diferential loss if processed further -52000

incremental revenue > further processing cost

sales value after processing - sales at split of

= profitable
1
Revenue if processed as rattles 2200
Revenue at split of 0
Incremental revenue from processing further 2200
Processing expenses 660
Contribution from Rattles 1540

Lost revenue from rattle -2200

Cost savings - processing expenses 660
Loss contribution if rattle is dropped -1540

2 Revenue at split of
Revenue at split of 1440 Total cost 26400
Contribution from Rattles 1440 Cost per snake 11
Number of snakes 2400
Contribution from Rattles 100 Price at split of 0.6
Revenue 1440