Lafayette Company manufactures two products out of a joint process: Compod and Ultrasene. The joint costs incurred are $930,000 for a standard production run that generates 138,000 gallons of Compod and 98,000 gallons of Ultrasene. Compod sells for $15.00 per gallon while Ultrasene sells for $14.25 per gallon.

Problem 17-32 Part 3

3.Suppose the following additional processing costs are required beyond the split-off point in order to obtain Compod and Ultrasene: $2.10 per gallon for Compod and $5.10 per gallon for Ultrasene.

a.Calculate the amount of joint cost of each production run allocated to Ultrasene on a physical-units basis.

b.Calculate the amount of joint cost of each production run allocated to Compod on a net-realizable-value basis.

4.Assuming the same data as in requirement 3, suppose Compod can be processed further into a product called Compodalene, at an additional cost of$3.00 per gallon. Compodalene will be sold for $18.60 per gallon by independent distributors. The distributors' commission will be 10 percent of the sales price. Calculate the incremental gain or loss from further processing Compod into Compodalene.