note: It's unlikely that the dollar amounts in this problem are at all realistic. The relationship between gallons of seawater and pounds of salt is close, hopefully (!), but I couldn't find much data on the cost of desalination. I usually try to make the problems as realistic as possible but data for this was hard to find.

Freshwater, Inc. produces drinking water from saltwater through a desalination process. Salt, a byproduct of the process, can be sold. Both products are fully processed at the split-off point. There are no separable costs.

For September, the cost to desalinate 326,000 gallons of seawater was $97,500. Production and sales data are as follows:

Measure Production Sales Sales price

Drinking water Gallons 325,000 300,000 $0.75

Salt Pounds 10,000 6,500 0.50

There were no beginning inventories at 9/1.

9. What is the gross profit for September under the Net Realizable Value method?

10. What is the gross profit for September under the Manufacturing Cost Reduction method?

11. What is the total inventory value at 9/30 under the Net Realizable Value method?

12. What is the total inventory value at 9/30 under the Manufacturing Cost Reduction method?