(Appendix) Replacement Method: Valley Cane Company processes sugar cane into various output products. The outputs from the first stage of the process consist of two grades of sugar: refined and turbinado. In a typical month, $218,000 in sugar cane are processed and $325,000 in labor and overhead are incurred. A standard output mix consists of 40 percent refined sugar and 60 percent turbinado. Engineering studies assign 55 percent of the joint processing costs to the refined sugar. If the processing temperature is increased, the yield of refined sugar can be increased by 20 percent (that is, from 40 percent of the initial output to an amount equal to 48 percent of the initial output). However, processing costs are increased 7.5 percent when this is done, and 15 percent of the original yield of turbinado is lost. The replacement cost is to be estimated on the basis of actual costs, not net realizable values.

Required: Compute the costs that would be assigned to the additional refined sugar, using the replacement method.