Question
MIX DECISIONS. The Chicago Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and
MIX DECISIONS. The Chicago Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product C is fully processed by the splitoff point. Products A, B, and D can individually be further refined into Super A, Super B, and Super D. In the most recent month (November), the output at the splitoff point was as follows:
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Product A, 550,000 gallons
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Product B, 200,000 gallons
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Product C, 150,000 gallons
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Product D, 100,000 gallons
The joint costs of purchasing and processing the crude vegetable oil were $210,000. Chicago had no beginning or ending inventories. Sales of product C in November were $90,000. Products A, B, and D were further refined and then sold. Data related to November are as follows:
Separable Processing Costs to Make Super Products | Revenues | |
---|---|---|
Super A | $480,000 | $750,000 |
Super B | 120,000 | 300,000 |
Super D | 90,000 | 150,000 |
Chicago had the option of selling products A, B, and D at the splitoff point. This alternative would have yielded the following revenues for the November production:
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Product A, $150,000
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Product B, $125,000
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Product D, $135,000
Required:
1. Draw a diagram of the question labelling and showing joint costs, split-off point, joint products, separable costs and fully-processed products.
2. Allocate the joint costs among the 4 products using the following methods:
a) Sales value at splitoff
b) Physical measures
c) Net realizable value
d)Determine whether Chicago Oil should further process products A, B, or D. (show calculations)
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