Tasty Foods produces two types of microwavable products: beef-flavored ramen and shrimp-flavored ramen. The two products share common inputs such as noodle and spices. The production of ramen results in a waste product referred to as stock, which Tasty dumps at negligible costs in a local drainage area. In June 2017, the following data were reported for the production and sales of beef-flavored and shrimp-flavored ramen:

Due to the popularity of its microwavable products, Tasty decides to add a new line of products that targets dieters. These new products are produced by adding a special ingredient to dilute the original ramen and are to be sold under the names Special B and Special S, respectively. Following are the monthly data for all the products:

Required:
1. Calculate Tasty's gross-margin percentage for Special B and Special S when joint costs are allocated using the following:
a. Sales value at splitoff method
b. Physical-measure method
c. Net realizable value method
2. Recently, Tasty discovered that the stock it is dumping can be sold to cattle ranchers at $5 per ton. In a typical month with the production levels shown, 3,000 tons of stock are produced and can be sold by incurring marketing costs of $11,100. Sabrina Donahue, a management accountant, points out that treating the stock as a joint product and using the sales value at splitoff method, the stock product would lose about $6,754 each month, so it should not be sold. How did Donahue arrive at that final number, and what do you think of her analysis? Should Tasty sell the stock?

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HomeInset Page Layout Formulas Data Review Joint Costs Joint costs (costs of noodles, spices, and other 2 inputs and processing to splitoff point) $380,000 Beef Shrimp Ramen Ramen 4 5 Beginning inventory (tons 6 Production (tons 7 Sales (tons) 9,00011,000 9,00011,000 $15$ 35 Home Insert Page Layout Formulas Data Review View Joint Costs Special B Special S Joint costs (costs of noodles, spices, and other 12 inputs and processing to splitoff 13 Beef Ramen into 12,000 tons of Special B 14 Shrimp Ramen into 17,000 tons of S $380,000 rable costs of processing 9,000 tons of $36,000 Separable cost of processing 11,000 tons of IS $136,000 15 Shrimp 16 17 Beginning inventory (tons) 18 Production (tons) 19 Transfer for further processing (tons 20 Sales (tons Ramen Ramen Special BSpecialS 17,000 17,000 $ 20 47 9,00011,000 12 9,00011,000 12,000 12,000