Joint Costs and Process Costs: First-in, First-out; Sell or Process Further The Chemo Company manufactures two principal products, known as Gummo and Yummo. The company has three producing departments, A, B, and C.

Raw material is started in process in Department A. Upon completion of joint processing in that department, two distinct chemicals are produced.

One-fourth of the output goes to Department B, where it is made into Gummo;

the other three-fourths goes to Department C, where it becomes Yummo. As Gummo and Yummo are completed, they are immediately transferred to finished stock.

The company assigns Department A costs to Gummo and Yummo in proportion to their net sales values at point of separation, computed by deducting costs to be incurred in subsequent processes from the sales value of the products.

The following information concerns the operations during May 19_1:

INVENTORIES APRIL 30 MAY 31 Units Cost Units Department A None None Department B 500* $10,000 7007 Department C 1,000* 11,300 700+

Finished goods—Gummo 800 19,200 500 Finished goods—Yummo 600 13,200 800

* Each unit is 1/5 completed.

+ Each unit is 3/5 completed.

Twelve thousand units of output were produced in Department A.

COSTS INCURRED IN MAY Materials Used Conversion Costs Department A $72,000 $72,000 Department B _ $15,600 Department C — $12.00 per equivalent unit SALES PRICES Gummo $25.00 per unit Yummo $22.00 per unit Prices as of May 31 are unchanged from those in effect during the month.
The company uses first-in, first-out to cost out production.
. For May production, conversion cost per equivalent unit in Department B.
. Conversion cost per equivalent unit in Department A.
. Total costs transferred to Department B.
. Costs transferred from Department B to finished stock.
. The company is considering a chance to sell the product that now goes into Department C at the split-off point, instead of processing it into Yummo.
(Gummo would continue to be processed as usual.) If the long-run selling price at split-off point will be $10, should the company close down Department C and sell at split-off? Why? Answer in seventy words or less. l-01