Question
I need help with question 6. I provided the additional information from part 3-4 Lafayette Company manufactures two products out of a joint process: Compod
I need help with question 6. I provided the additional information from part 3-4
Lafayette Company manufactures two products out of a joint process: Compod and Ultrasene. The joint costs incurred are $250,000 for a standard production run that generates 120,000 gallons of Compod and 80,000 gallons of Ultrasene. Compod sells for $2.00 per gallon while Ultrasene sells for $3.25 per gallon.
3. Suppose the following additional processing costs are required beyond the split-off point in order to obtain Compod and Ultrasene: $0.10 per gallon for Compod and $1.10 per gallon for Ultrasene. a. Calculate the amount of joint cost of each production run allocated to Ultrasene on a physical-units basis. b. Calculate the amount of joint cost of each production run allocated to Compod on a net-realizable-value basis.
Answer: joint cost allocated to ultrasene $100,00 and joint cost allocated to compod $142,500
4. Assuming the same data as in requirement 3, suppose Compod can be processed further into a product called Compodalene, at an additional cost of $0.40 per gallon. Compodalene will be sold for $2.60 per gallon by independent distributors. The distributors commission will be 10 percent of the sales price. Calculate the incremental gain or loss from further processing Compod into Compodalene. Answer: Incremental loss per gallon .06
6. Assume the same data as given in parts 3 and 4. The industrial chemical industry has experienced a downturn, which has left Lafayette with idle capacity. Suppose Lafayette can sell only half of the Compod made in each production run, but the remainder could be sold as Compodalene. Calculate the contribution per unit that Compodalene makes towards covering the joint production cost, fixed costs, and profit
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