The Sierra Company

The Sierra Company produces X, Y, and Z in a joint process. Budgeted joint costs total $120,000. Other budgeted data are provided below:

	Products
	X	Y	Z
Pounds produced	10,000	15,000	20,000
Selling price per pound at split-off point	$ 8	$15	$15
Additional costs per pound if processed beyond split-off	$ 4	$ 6	$ 9
Selling price per pound if processed further	$15	$19	$28

Required.

1.) Describe at least two allocation bases that can be used to allocate the $120,000 in joint costs to the three joint products. Which method do you prefer and why?

2.) Sierra management is trying to decide whether the three joint products should be sold at split-off or processed further. Discuss how this decision should be made. Be sure to identify the relevant and non-relevant items.

3.) Which joint processes should be processed further?