Analyze Joyous Julius, Inc.

Joyous Julius, Inc., is a large retail chain that has grown quickly thanks to its successful leveraging of homemade$-$style orange julius. The company would like to narrow down the number of flavors it offers to three.

Joyous Julius, Inc., currently produces six different flavors of orange julius: pure orange, raspberry orange, mango orange, strawberry orange, tropical orange, and coconut orange. The orange julius flavors are produced jointly in a mixing process that costs a total of $$2,500$ per batch. At the end of each joint production batch, $900$ cups of pure orange Julius are produced. Another $1,180$ cups of various Julius flavors are processed further. Information about the production of each batch is summarized in the following table:

Orange Julius Flavor Cups per

Batch Market Value

per Cup at

Split$-$Off Market Price

per Cup

After Further

Processing Added Cost

per Cup

Pure orange $900$ $$3\mathrm{.}00$ $$3\mathrm{.}00$ $$0\mathrm{.}00$

Raspberry orange $5003\mathrm{.}003\mathrm{.}350\mathrm{.}15$

Mango orange $3003\mathrm{.}003\mathrm{.}300\mathrm{.}10$

Strawberry orange $1503\mathrm{.}003\mathrm{.}300\mathrm{.}20$

Tropical orange $1303\mathrm{.}003\mathrm{.}100\mathrm{.}40$

Coconut orange $1003\mathrm{.}003\mathrm{.}250\mathrm{.}65$

One of the by$-$products of the production of the orange julius is orange peels. Joyous Julius, Inc., has found a company that produces nutritional smoothies that would be willing to buy Joyous Julius$$s orange peels for $$40$ per batch. Joyous Julius, Inc., is interested in the deal but doesn$$t know how to account for these additional revenues.

a$.$ With the given information identify the flavors that should not be processed beyond the split$-$off point.

a$.$ Tropical and coconut orange

b$.$ Pure orange and raspberry orange

c$.$ Mango orange

d$.$ Strawberry orange

a

b$.$ Assuming pure orange is kept as a flavor, what other two flavors should the company keep?

a$.$ Tropical orange and coconut orange.

b$.$ Coconut orange and raspberry orange.

c$.$ Mango orange and raspberry orange.

d$.$ Strawberry orange and tropical orange.

c

c$.$ Assume that Joyous Julius, Inc., keeps pure orange and the two other flavors you identified in part $($b$)$ and that additional cups of the pure orange flavor replace all discontinued flavors in the joint production process. Using the net realizable value method, determine the amount of joint production costs that should be allocated to each of the remaining three products.

Joint Product Allocation

Pure orange $fill in the blank $3$

Raspberry orange fill in the blank $4$

Mango orange fill in the blank $5$

Totals $fill in the blank $6$

d$.$ What are the ways that revenue from a by$-$product can be recorded?

a$.$ The revenue from the by$-$product can be ignored since it is not related to the main business of the company.

b$.$ The revenue from the by$-$product can be used to offset the cost of the joint production process or it can be reported as other revenue on the income statement.

c$.$ The revenue generated can be used to offset the cost due to joint venture costs.

d$.$ None of the above.