Indiana Soy Products (OSP) buys soybeans and processes them into other soy products. Each ton of soybeans that ASP purchases for $380 can be converted for an additional $220 into 575 lbs of soy meal and 80 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.04 and soy oil can be sold in bulk for $4 per gallon.

OSP can process the 575 pounds of soy meal into 625 pounds of soy cookies at an additional cost of $330. Each pound of soy cookies can be sold for $2.04 per pound. The 80 gallons of soy oil can be packaged at a cost of $250 and made into 320 quarts of Soyola. Each quart of Soyola can be sold for $1.35.

Requirements:

1.Allocate the joint cost to the cookies and the Soyola using the following:

a.Sales value at splitoff method

b.NRV method

2.Should ASP have processed each of the products further? What effect does the allocation method have on this decision?

Requirement 1. Allocate the joint cost to the cookies and the Soyola using the (a) Sales value at splitoff method and (b) NRV method.

a. First, allocate the joint cost using the Sales value at splitoff method. (Round the weights to three decimal places and joint costs to the nearest dollar.)

	Cookies/	Soyola/
	Soy Meal	Soy Oil	Total
Sales value of total production at splitoff
Weighting
Joint costs allocated

b. Now allocate the joint cost to the cookies and the Soyola using the NRV method. (Round the weights to three decimal places and joint costs to the nearest dollar.)

	Cookies	Soyola	Total
Final sales value of total production
Deduct separable costs
Net realizable value
Weighting
Joint costs allocated

Requirement 2. Should ASP have processed each of the products further? What effect does the allocation method have on this decision? Begin by calculating the profit or loss that would occur if ASP processed the products further. (Use parentheses or a minus sign for losses.)

	Cookies/	Soyola/
	Soy Meal	Soy Oil
Sell at splitoff : Revenue
Process further : NRV
Profit (Loss) from processing further