Question
Iowa Soy Products (ISP) buys soy beans and processes them into other soy products. Each ton of soy beans can be converted for an additional
Iowa Soy Products (ISP) buys soy beans and processes them into other soy products. Each ton of soy beans can be converted for an additional $200 into 500 pounds of soy meal and 100 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1 and soy oil can be sold in bulk for $4 per gallon. ISP can process the 500 pounds of soy meal into 600 pounds of soy cookies at an additional cost of $300. Each pound of soy cookies can be sold for $2 per pound. The 100 gallons of soy oil can be packaged at a cost of $200 and made into 400 quarts of Soyola. Each quart of Soyola can be sold for $1.25.
| Soy meal | Soy Oil | soy cookies | Soyola |
Joint Cost | 200$ |
|
| |
Separable Costs |
|
| 300$ | 200$ |
Production | 500 | 100 | 600 | 400 |
Selling Price | 1$ | 4$ | 2$ | 1.25$ |
*. Allocate the joint cost to the cookies and the Soyola using the following:
a. Sales value at splitoff method (Soy Meal & Soy Oil)
b. NRV method (Cookies & Soyola)
*. Should ISP have processed each of the products further?
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