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Problem 11-69 Effect of Cost Allocation on Pricing and Make versus Buy Decisions (LO 117,8,9) Ag-Coop is a large farm cooperative with a number of agriculture-related manufacturing and service divisions. As a cooperative, it pays no federal income taxes. The company owns a fertilizer plant that processes and mixes petrochemical compounds into three brands of agricultural fertilizer greenup, maintane, and winterizer. The three brands differ with respect to selling price and the proportional content of basic chemicals. Ag-Coop's Fertilizer Manufacturing Division transfers the completed product to the cooperative's Retail Sales Division at a price based on the cost of each type of fertilizer plus a markup The Manufacturing Division is completely automated so that the only costs it incurs are the costs of the petrochemical feedstocks plus overhead that is considered foxed. The primary feedstock costs $1 40 per pound Each 100 pounds of feedstock can produce either of the following moxtures of fertilizer Output Schedules (in Maintane Winterizer 50 20 30 60 10 30 Production is limited to the 810,000 kilowatt hours monthiy capacity of the debydrator. Due to different chemical makeup, each brand of tertilizer requires difterent dehydrator use Dehydrator usage in kilowatt-riours per pound of product tollows Pound Greenup Maintane 40 Monthly fixed costs are $81,000 The company currently is producing according to output schedule A Joint production costs including foxed overhead are allocated to each product on the basis of weight The fertilizer is packed into 100-pound bags for sale in the cooperative's retail stores The sales price for each product charged by the cooperative's Retail Sales Division follows Sales Price per S 10 50 9 00 10 40 Greenup