Refer to the data given in Exercise 19.30. Crunch-Time Cereal Company has an opportunity to further process its Crummies into a mulch for ornamental shrubs. The additional processing operation costs $1.50 per kilogram, and the mulch will sell for $10.50 per kilogram.

In E 19.30

Crunch-Time Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information follows:

Required:
1. Should Crunch-Time process Crummies into the mulch? Explain your answer
2. Suppose the company does process Crummies into the mulch. Use the net realisable value method to allocate the joint production cost to the mulch and to the Yummies.

Sales price per kilogram Quantity at split-off point Cereal Joint Cost 12 000 kilograms 8 000 kilograms $6.00 Yummies $120 000 $7.50 Crummies