Friendly Fertilizer Corporation uses organic materials to produce fertilizers for home gardens. Through its production processes, the
Question:
Friendly Fertilizer Corporation uses organic materials to produce fertilizers for home gardens. Through its production processes, the company manufactures Nitro, a high nitrogen fertilizer, and Phospho, a high phosphorus fertilizer. A by-product of the process is methane, which is used to generate power for the company’s operations. The fertilizers are sold either in bulk to nurseries or in individual packages to home gardeners. The company allocates the costs on the basis of the physical-measures method.
Last month, 275,000 units of input were processed at a total cost of $180,000. The output of the process consisted of 50,000 units of Nitro, 75,000 units of Phospho, and 150,000 units of methane. The by-product methane would have cost $4,000 had it been purchased from the local gas utility. This is considered to be its net realizable value, which is deducted from the joint processing costs of the main products.
Required
a. What share of the joint costs should be assigned to each main product using the physical-measures method?
Step by Step Answer:
Cost Management Strategies For Business Decisions
ISBN: 12
4th Edition
Authors: Ronald Hilton, Michael Maher, Frank Selto