Terrace Labs produces a drug used for the treatment of arthritis. The drug is produced in batches.

In March, Terrace, which had no opening inventory, processed one batch of chemicals. It sold 1,500 gallons of product for human use and 550 gallons of the veterinarian product. Terrace uses the net realizable value method for allocating joint production costs.

Requirement 5. Suppose that the separation process also yields 330 pints of a toxic byproduct. Terrace currently pays a hauling company $5,500 to dispose of this byproduct. Terrace is contacted by a firm interested in purchasing a modified form of this byproduct for a total price of $7,200. Terrace estimates that it will cost about $30 per pint to do the required modification. Should Terrace accept the offer?

Chemicals costing $46,000 are mixed and heated, then a unique separation process then extracts the drug from the mixture. A batch yields a total of 2,800 gallons of the chemicals. The first 2, 100 gallons are sold for human use while the last 700 gallons, which contain impurities, are sold to veterinarians. The costs of mixing, heating, and extracting the drug amount to $450,300 per batch. The output sold for human use is pasteurized at a total cost of $119,700 and is sold for $580 per gallon. The product sold to veterinarians is irradiated at a cost of $16 per gallon and is sold for $500 per gallon. Requirement 1. How much in joint costs does Orchard allocate to each product? (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.) Joint costs allocated to human product Joint costs allocated to veterinarian product Requirement 2. Compute the cost of ending inventory for each of Orchard's products. (Round the cost per gallon amounts to the nearest cent.) Human Product Vet Product Total Separable costs Joint costs Total costs Units produced (gallons) Cost per gallon Units in ending inventory (gallons) Cost of ending inventory Requirement 3. If Orchard were to use the constant gross-margin percentage NRV method instead, how would it allocate its joint costs? Human Product Vet Product Total Final sales value of production Gross margin Total costs Separable costs Joint costs Requirement 4. Calculate the gross margin on the sale of the product for human use in March under the constant gross-margin percentage NRV method. The gross margin on the sale of the product for human use in March under the constant gross-margin percentage NRV method is Should Orchard accept the offer? Will net income increase or decrease? By how much