Sugar Farmers grows sugar beets; these large beets have a high natural sugar content that the company refines to produce commercial sugar. The sugar processing factory accepts only topped beets, whose leaves, stems, and crowns (called tops) are removed. Thus, the topping process is necessary for the marketability of all products. The first process when harvesting beets is to cut off the tops while the beets are still in the ground. Tractors pull machines over the beets; these machines cut off the tops, grind them and convey them into trucks that are driven along side. On delivery to the cattle feed processor, tops are weighted by the truckload.

Despite their small market value in relation to the beets, tops do have a significant value.

After processing, tops are fed to cattle.

Tractors pull other machines over the topped beets to dig them from the ground and deposit them into a hopper. Later trucks transport these hoppers to the sugar refinery.

Accountants with the sugar grower question whether the cause-and-effect criterion should impact their treatment of the joint cost allocation. Managers often use the cause-and-effect criterion in cost allocations when they can identify the variable causing a cost to occur. A cause-and-effect relationship exists if a cost pool can be related directly to cost objectives.

They question if sequential, rather than simultaneous, production processing of products should affect their decision.

Required:

Write a memo to these accountants explaining the following:

a. Whether tops are by-products or joint products.

b. Whether they should assign the cost of cutting tops solely to the beet tops or consider the cost of this process a joint cost.

c. Whether their decision to assign the cost of cutting tops solely to the beet tops or to treat this as a joint cost should be affected by the fact that the tops are identifiable from the sugar beets and can be weighed.

d. The role, if any, of the cause-and-effect criterion in joint cost allocations.