Integrative Case 11-79 (Static) Effect of Cost Allocation on Pricing and Make-versus-Buy Decisions (LO 113,4) Ag-Coop is a large farm cooperative with a number of agriculture-related manufacturing and service divisions. As a cooperative, it pays no federal income taxes. The company owns a fertilizer plant that processes and mixes petrochemical compounds into three brands of agricultural fertilizer: greenup, maintane, and winterizer. The three brands differ with respect to selling price and the proportional content of basic chemicals. Ag-Coop's Fertilizer Manufacturing Division transfers the completed product to the cooperative's Retail Sales Division at a price based on the cost of each type of fertilizer plus a markup. The Manufacturing Division is completely automated so that the only costs it incurs are the costs of the petrochemical feedstocks plus overhead that is considered fixed. The primary feedstock costs $1.50 per pound. Each 100 pounds of feedstock can produce either of the following mixtures of fertilizer: Production is limited to the 750,000 kilowatt-hours monthly capacity of the dehydrator. Due to different chemical makeup, each brand of fertilizer requires different dehydrator use. Dehydrator usage in kilowatt-hours per pound of product follows: Monthly fixed costs are $81,250. The company currently is producing according to output schedule A. Joint production costs including fixed overhead are allocated to each product on the basis of weight. The fortizer is packed into 100-pound bags for sale in the cooperative's retall stores. The sales price for each product charged by the cooperative's Retail Sales Division follows: Seling expenses are 20 percent of the sales price. The Retail Sales Division manager has complained that the prices charged by the Manufacturing Division are excessive and that he would prefer to purchase from another supplier Selling expenses are 20 percent of the sales price. The Retail Sales Division manager has complained that the prices charged by the Manufacturing Division are excessive and that he would prefer to purchase from another supplier. The Manufacturing Division manager argues that the processing mix was determined based on a careful analysis of the costs of each product compared to the prices charged by the Retail Sales Division. Required: a. Assume that joint production costs including fixed overhead are allocated to each product on the basis of weight What is the cost. per pound of each product, Including fixed overhead and the feedstock cost of $150 per pound, glven the current production schedule? b. Assume that joint production costs including fixed overhead are allocated to each product on the basis of net realizable value if sold through the cooperative's Retal Sales Division. What is the allocated cost per pound of each product given the current production schedule? c. Assume that joint production costs including fixed overhead are allocated to each product on the basis of woight Calculate the operating profit under both Schedule A and Schedule B. Which of the two production schedules. A or B. produces theifigher operoting profit to the firm as a whole? Complete this question by entering your answers in the tabs below. Assume tha joint production costs including fixed overthead are allocated to each product on the basis of welght what is the cost per pound of each product, Including foxed overhead and the feedstock cost of $1.50 per pound, given the currens production schedule? Note: Do not round intermediate calculations, Round your answer to 2 decimal places: The Retail Sales Division manager has complained that the prices charged by the Manufacturing Division are excessive and that he would prefer to purchase from another supplier. The Manufacturing Division manager argues that the processing mix was determined based on a careful analysis of the costs of each product compared to the prices charged by the Retail Sales Division. Required: a. Assume that joint production costs including fixed overhead are allocated to each product on the basis of weight What is the cost per pound of each product, including fixed overhead and the feedstock cost of $1.50 per pound, given the current production schedule? b. Assume that joint production costs including fixed overhead are allocated to each product on the basis of net realizabie value if sold through the cooperative's Retail Sales Division. What is the allocated cost per pound of each product given the current production schedule? c. Assume that joint production costs including fixed overhead are allocated to each product on the basis or weight. Calc ulate the operating profit under both Schedule A and Schedule B. Which or the two production schedules. A or B.produces the higher operating profit to the firm as a whole? Complete this question by entering your answers in the tabs below. Assume that joint productith costs including fixed overnead are allocated to each product on the basis of pet realizabie value If sold through the cooperative's Retail Sales Division. What is the allocated cost per pound of each product given the current production schedule? Note: 00 not round intermediate calculations. Round your answers to 2 decimal piaces. The Retail Sales Division manager has complained that the prices charged by the Manufacturing Division are excessive and that he would prefer to purchase from another supplier: The Manufacturing Division manager argues that the processing mix was determined based on a careful analysis of the costs of each product compared to the prices charged by the Retall Sales Division. Required: a. Assume that joint production costs including fixed overhead are allocated to each product on the bisis of weight. What is the cost. per pound of each product, including fixed overhead and the feedstock cost of $1.50 per pound, given the curfent production schedule? b. Assume that joint production costs including foxed overhead are allocated to each product on the basis of net realizable value if soli through the cooperative's Retail Sales. Division. What is the allocated cost per pound of each peoduct, given the curtent production schedule? c. Assume that joint production costs including fixed overthead are allocated to each product on the basis of weight Calculate the operating profit under both Schedule A and Schedule B. Which of the two production schedules. A or B. produces the higher operating profit to the firm as a whole? Complete this question by entering your answers in the tabs below. Assume that joint production costs including foxed overthead are allocated to each product on the basts of weight. Calculate the operating profit under both Schedule A and Schedule B. Which of the two production schedules, A or B, produces the Figher operating profit to the firm as a whole? Note: Round intermediate calculations to the nearest pound and finat answers to the nearnst cent