Question
Brevall Industries makes corn oil and corn meal from harvested corn in a joint process. Corn oil can be further processed into margarine, and the
Brevall Industries makes corn oil and corn meal from harvested corn in a joint process. Corn oil can be further processed into margarine, and the corn meal can be further processed into corn muffin mix. The joint cost incurred to process the corn to the split-off point is $140,000. Information on the quantities, value, and further processing costs for the joint product appears below:
| Quantity | Sales Value At Split-off | Estimated Further Processing Cost | Sales Value After Processing | |||||
| Corn Oil | 800,000 lbs. | $0.30/lb. | $0.15/lb. | $0.60/lb. | ||||
| Corn Meal | 1,600,000 lbs. | 0.10/lb. | 0.46/lb. | 0.55/lb. |
Brevall allocates the joint cost to the products based on physical units. Corn oil is assigned $46,667 of joint cost and corn meal is assigned $93,333 of joint cost. Which products should be processed further?
|
| Corn oil |
|
| Corn meal |
|
| Both corn oil and corn meal |
|
| Neither corn oil nor corn meal |
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