Yonica Petroleum is a global manufacturer of specialty chemicals which are made from the waste products of the petroleum industry. Yonica in effect recycles a good portion of the waste from the refineries used by the large oil companies. The specialty chemicals are used as cleaning solvents and lubricants in industrial applications. Yonica has three products -- Y64, G22, and X17 -- and total joint production cost of $356,000. Yonica plans to process all three products beyond the split-off point in order to maximize its cash flow from sales.

	Y64	G22	X17
Gallons produced and sold	22,000	45,000	18,000
Sales price at split-off point	$2.24	2$.28	$0.44
Separable processing costs	$65,500	$34,250	$55,400
Sales price after separable processing	$10.50	$6.75	$4.22
Numbers of Customers	22	3	46

A) 1. Which method of allocating the joint processing costs among the three products should be used by Yonica Petroleum? Explain the rationale for your selection.

2. Allocate the joint processing costs per the method selected.

B) While Yonica chose to process all three products beyond the split-off point, do you think this is the correct decision? Explain your assessment.

C) Because Yonica is involved in the recycling of waste chemicals, it is able to purchase its materials at a greatly reduced cost. However, its manufacturing costs are slightly higher than some of its competitors because of the relatively high cost of recycling. Yonica plans to bring these recycling costs down in the next 18 months. Yonica has been able to compete successfully by maintaining lower margins than its competitors and because some of its customers are willing to pay more for a product that has been manufactured from recycled material. Comment on Yonicas strategy and why (or why not) you think it will continue to be successful.