Innerva Soy Products (MSP) buys soybeans and processes them into other soy products. Each ton of soybeans that MSP purchases for $280 can be converted for an additional $170 into

625 lbs of soy meal and 120 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.08 and soy oil can be sold in bulk for $4.5 per gallon.

MSP can process the 625 pounds of soy meal into 775 pounds of soy cookies at an additional cost of $330. Each pound of soy cookies can be sold for $2.08 per pound. The 120 gallons of soy oil can be packaged at a cost of $210 and made into 480 quarts of Soyola. Each quart of Soyola can be sold for $1.15.

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 MSP have processed each of the products further? What effect does the allocation method have on this decision?