Wyalusing Chemicals uses a joint process to produce MJ-4, a chemical used in the manufacture of paints and varnishes; HD-10, a chemical used in household cleaning products; and FT-5, a by-product that is sold to fertilizer manufacturers. Joint production costs are allocated to the main products on the basis of net realizable value. The by-product is inventoried at its net realizable value, and this value is used to reduce the joint production cost before allocation to the main products.

During the month of November, Wyalusing incurred joint production costs of $3,136,000. Data regarding Wyalusing’s November operations are as follows:

Required:
1. Define the terms joint costs and split-off point.
2. Determine the dollar values of Wyalusing Chemicals’ finished-goods inventories on November 30 for MJ-4 and HD-10.
3. Wyalusing Chemicals has an opportunity to sell HD-10 for its sales value at the split-off point. Determine if management should sell HD-10 at the split-off point or continue to process it further.
(CPA,adapted)

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November production in gallons Sales value per gallon at split-off Separable processing cost Final sales value per gallon... Finished-goods inventory in gallons on MJ-4 600,000 None $1,44000 HD-10 320,000 $6.00 $1,840,000 $12.75 FT-5 85,000 S1.80 None None $8.00 November 30 (all produced during Novermber) Disposal oosts ot $.20 par galon will be incurred in order to seli the by-product 26,000 1,500