Arcadia Labs produces a drug used for the treatment of arthritis. The drug is produced in batches.

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In March, Arcadia, which had no opening inventory, processed one batch of chemicals. It sold $1,500$ gallons of product for human use and $100$

BMC$17-16($book$/$static$)$

gallons of the veterinarian product. Arcadia uses the net realizable value method for allocating joint production costs.

Requirements

How much in joint costs does Arcadia allocate to each product?

Compute the cost of ending inventory for each of Arcadia's products.

If Arcadia were to use the constant gross$-$margin percentage NRV

method instead, how would it allocate its joint costs?

Calculate the gross margin on the sale of the product for human use in March

under the constant gross$-$margin percentage NRV method.

Suppose that the separation process also yields $330$ pints of a toxic

byproduct. Arcadia currently pays a hauling company $$5,600$ to dispose of this

byproduct. Arcadia is contacted by a firm interested in purchasing a modified

form of this byproduct for a total price of $$7,500.$ Arcadia estimates that it will

cost about $$34$ per pint to do the required modification. Should Arcadia accept

the offer?

More info

Chemicals costing $$49,000$ are mixed and heated, then a unique separation

process then extracts the drug from the mixture. A batch yields a total of $2,500$

gallons of the chemicals. The first $2,300$ gallons are sold for human use while the

last $200$ gallons, which contain impurities, are sold to veterinarians. The costs

of mixing, heating, and extracting the drug amount to $$293,500$ per batch. The

output sold for human use is pasteurized at a total cost of $$128,800$ and is sold for

$$650$ per gallon. The product sold to veterinarians is irradiated at a cost of $$18$ per

gallon and is sold for $$440$ per gallon.