Question
In a joint process Marginora Chemicals produces four super high end solutions: C439SKT, T469GHT, O853AGR, and J506AVF. T469GHT has to be processed further in Department
In a joint process Marginora Chemicals produces four super high end solutions: C439SKT, T469GHT, O853AGR, and J506AVF. T469GHT has to be processed further in Department 2 before it can be sold. J506AVF does not have an option to be processed further. The remaining products may be sold at its split-off point or processed further. Joint processing costs for a single batch of the joint products are $1,816,500. Other relevant data are as follows: Department #2's Cost: $110,870 Optional additional processing cost for O853AGR: $121,180 Optional additional cost for C439SKT: $30,300 J506AVF: 418,000 liters produced @ a sales value of $3.80 per liter T469GHT: 216,800 liters produced @ a sales value of $4.30 per liter O853AGR: 121,600 liters produced. If sold at split-off the sales value is $3.75 per liter. If processed further can be sold for $4.35 per liter. C439SKT: 115,900 liters produced. If sold at split-off the sales value is $3.90 per liter. If processed further can be sold for $4.20 per liter. REQUIRED 1. Should O853AGR and/or C439SKT be processed further after the split-off point? 2. If it is determined to not process a product further, it will be sold at the split off point and additional processing will be ignored (see your answer to part 1). Allocate the joint cost to the four primary products using the approximated net realizable value method (round to whole dollars). 3. If all liters of each of the four products are sold what is the total gross profit of each product.
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