Yonica Petroleum is a global manufacturer of specialty chemicals that are made from the waste products of the petroleum industry. Yonica in effect recycles a good portion of the waste from the refineries used by large oil companies. The specialty chemicals are used as cleaning solvents and lubricants in industrial applications. Yonica has three products€”Y64, G22, and X17€”and total joint production costs of $356,000. Yonica plans to process all three products beyond the split-off point in order to be able to sell the products at the higher price after separable processing.

Required

1. Calculate the product cost of each of the three products using the following methods: (a) physical measure method, (b) sales value at split-off method, and (c) net realizable value method.

2. Which of the three methods listed in requirement 1 do you think would be preferred in this case? Why?

3. While Yonica chose to process all three products beyond the split-off point, do you think this is the correct decision? Which products, if any, do you think should have been processed beyond the split-off point, and why?

4. Because Yonica is involved in the recycling of waste chemicals, it is able to purchase its materials at greatly reduced cost. However, its manufacturing costs are slightly higher than some of its competitors because of the relatively high cost of recycling. Yonica plans to bring these recycling costs down in the next 18 months. Yonica has been able to compete successfully by maintaining lower margins than its competitors and because some of its customers are willing to pay more for a product that has been manufactured from recycled material. Comment on Yonica€™s strategy and whether you think it will continue to be successful.

5. What are some of the global issues that Yonica should consider in effectively executing its strategy?

6. What should Yonica do, if anything, to improve the overall effect of its operations on the environment?

Transcribed Image Text:

X17 Y64 G22 Gallons produced and sold Sales price at split-off polnt Separable processing costs Sales price after separable processing Number of customers 22,000 $2.24 45,500 $2.88 $34,250 $6.75 3 18,000 $0.44 $55,400 $4.22 46 $65,500 $10.50 22