(c) Dammam Petrochemical produces two products Silka and Super A by a joint production process. Joint costs amount to $180,000 per batch of output. Each batch totals 15,000 tons: 20% Silka and 80% Super A. Both products are processed further without gain or loss in volume. Separable processing costs are Silka, $4.5 per ton ; Super A, $3 per ton. Silka sells for $31.5 per ton. Super A sells for $21 per ton.

Required

1. If joint costs are allocated on the Net Realizable Value basis (NRV), how much of the joint costs will be allocated to Silka and Super A? (7 points)

2. Prepare a product-line income statement per batch for requirement (i). Assume no beginning or ending inventory. (5 points)

The Company has discovered an additional process by which Silka product can be processed further into a fertilizer component known as F2220. The selling price of F220 would be $90 per ton. Additional processing would increase separable costs $13.5 per ton (in addition to the $4.5 per ton separable cost required to yield Silka). The company would have to pay sale tax of 20% on the selling price of product F220. Assuming no other changes in cost, what is the joint cost applicable to the joint production process using the NRV method? Should the company produce F220? Show your computations.