Manitoba Soy Products (MSP) buys soy beans and processes them into other soy products. Each ton of soy beans that MSP purchases for $300 can be converted for an additional $17 into 675lbs of soy meal and 100 gallons of soy oil. A pound of soy meal can be sold at split off for $1, and soy oil can be sold in bulk for $4 per gallon. MSP can process the 675lbs of soy meal into 775lbs of soy cookies at an additional cost of $360.

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

$270 and made into 400 quarts of Soyola. Each quart of Soyola can be sold for $1.15.

1. Allocate the joint cost to the cookies and the Soyola using:

a. Sales value at split off method

b. NRV method

2. Should the company have processed each of the products further? What effect does the allocation method have on this decision?