Part I:

Beverage Company makes two products, Hot and Cold. Annual joint processing costs incurred up to the split off point total $100,000. At the split-off point, Hot can be sold for $10 per unit and Cold can be sold for $15 per unit. Each product can be processed further; Hot would require additional costs of $5 per unit and could then be sold for $14 per unit. Cold could be sold for $25 per unit if additional costs of $8 are incurred. Sales for the upcoming year are projected to be 5,000 units of Hot and 7,500 units of Cold.

Should the products be sold at the split off point or processed further?

Part II:

Sallys Subs, Inc. is considering the purchase of a new delivery truck to increase the home delivery capacity of its business over the next five years. The following information related to the truck has been determined:

Acquisition cost	$40,000
Annual cash operating costs	7,000/year for 5 years
Annual cash revenues	20,000/year for 5 years
Expected salvage value	10,000 at the end of Year 5

The above amounts are all pre-tax. For both tax and financial reporting purposes, the company plans to depreciate the truck using the straight-line method over five years, with no salvage value used in calculating annual depreciation. The companys cost of capital is 14% and its tax rate is 30%. Sallys plans to use the truck for five years, then sell it for its salvage value.

Calculate the net present value for the investment. Would you recommend the purchase of the truck?

Part III:

Postman Company began operations on April 1, 2020, and manufactured 2,500 units during the month with the following unit costs:

Direct Materials	$7.50
Direct Labor	20.00
Variable Overhead	6.00
Fixed Overhead	16.00
Variable selling costs	2.50

Total fixed overhead is $40,000 per month; during April, 2,000 units were sold at a price of $85 and fixed selling/administrative expenses were $10,000.

1. Calculate the unit cost using variable costing.
2. Calculate the unit cost using absorption costing.
3. Calculate the cost of the April 30 finished goods inventory using variable costing