Sell or Process Further; Allocation of Fixed Costs The Space Parts Co. receives cold-worked steel in sheet form from a nearby steel mill. The company has a special patented machine that takes the sheet steel and produces three missile parts simultaneously. Part A is taken from the machine and further processed to make it available for sale at $3.50; the additional processing cost for part A is $495. Parts B and C are run through a vat containing a secret “dip” developed by one of the company engineers to make them heat-resistant. This dip costs 20¢ per cubic foot of product. Part B sells for $5 and part C for $8.25.

ADDITIONAL INFORMATION Materials $ 8,000 Direct labor 1,600 Maintenance and depreciation 1,200 $10,800 cost of running special machine for month Month’s production and sales (which is the typical product mix):
Part A 600 units Part B 800 units Part C 1,000 units Part B has a volume of .50 cu. ft.
Part C has a volume of .75 cu. ft.
The vat is being depreciated at the rate of $60 per month, requires two persons for its operation at a total salary of $1,500 per month, and necessitates other operating expenses of $165 per month. All these costs are fixed.

Joint costs assignable to each part for the month’s operations. Use the net realizable-value method.
2. The company has a chance to sell part B undipped at split-off at $4.70 each on a long-run basis. Should the company adopt this alternative?