16-23 Joint cost allocation: Sell immediately or process further. Illinois Soy P
ID: 2437803 • Letter: 1
Question
16-23 Joint cost allocation: Sell immediately or process further. Illinois Soy Products (ISP) buys soybeans and processes them into other soy products. Each ton of soybeans that ISP purchases for $340 can be converted for an additional $190 into 575 pounds of soy meal and 160 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.24 and soy oil can be sold in bulk for $4.25 per gallon.ISP can process the 575 pounds of soy meal into 725 pounds of soy cookies at an additional cost of $380. Each pound of soy cookies can be sold for $2.24 per pound. The 160 gallons of soy oil can be packaged at a cost of $240 and made into 640 quarts of Soyola. Each quart of Soyola can be sold for $1.35.
1.Allocate the joint cost to the cookies and the Soyola using the following:a.Sales value at splitoff methodb.NRV method
2. Should ISP have processed each of the products further? What effect does the allocation method have on this decision?
Explanation / Answer
1) the allocation of joint cost using sales value ayt split off point method :
2)allocation of joint cost using NRV method :
particulars cookies soyola total sales (units * cost per unit) (725*2.24) =1624 (640*1.35)=864 2488 persentage of sales(sales value/total) 65.27% 34.73% 100% allocation of joint cost : (340+190)*65.27% 346 (340+190)*34.73% 184 cost per unit (joint cost/total units) (346/725 pounds) $0.48 per pound (184/640 quart) 0.29 per quartRelated Questions
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