Find Maximum Input Price-Net Realizable Value Method: Rambling Rose Corporation produces two joint products from its manufacturing
Question:
Find Maximum Input Price-Net Realizable Value Method: Rambling Rose Corporation produces two joint products from its manufacturing operation. Product J sells for $37.50 per unit, while product M sells for $15.80 per unit. In a typical month. 19,000 input units are processed. Four thousand of these units become product J after an additional $37,500 of processing costs are incurred.
The remaining units are processed at a cost of $20,000. After processing these latter units, shrinkage amounting to 20 percent of the good output occurs. The good output is product M. Product M could be sold before this further processing at a price of $12 per unit. The joint process has only variable costs; no fixed costs. In a typical month, the conversion costs amount to $114,075. Materials prices are volatile, and if prices are too high, the company will stop production.
Required: What is the maximum price the company should pay for the materials?
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