Question
Lowrey Chemical manufactures two industrial chemicals in a joint process. In October, $310,000 of direct materials were processed at a cost of $410,000, resulting in
Lowrey Chemical manufactures two industrial chemicals in a joint process. In October, $310,000 of direct materials were processed at a cost of $410,000, resulting in 11,000 pounds of Pentex and 9,000 pounds of Glaxco. Pentex sells for $20 per pound and Glaxco sells for $30 per pound. Management generally processes each of these chemicals further in separable processes to manufacture more refined products. Pentex is processed separately at a cost of $10.00 per pound, with the resulting product, Pentex-R, selling for $60 per pound. Glaxco is processed separately at a cost of $20 per pound, and the resulting product, Glaxco-R, sells for $90 per pound. Required: A. Compute the company's total joint production costs. B. Assuming that total joint production costs amounted to $720,000, allocate these costs by using: (1) The physical-units method; (2) The relative-sales-value method; (3) The net-realizable-value method.
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