Indianola Beef buys sides of beef to convert into three products: steaks, roasts, and ground beef. In April 2013, Indianola bought multiple sides of beef for $20,000 that were converted into the following products at a cost of $6,400:
Product # of pounds Sales Value at split off
steaks 3312 $4.25 per pound
roasts 6210 $3.80 per pound
ground beef 4278 $0.90 per pound
The remaining 1,200 pounds were lost as waste.
a. Allocate the joint cost to the three products using the physical units method.
b. Allocate the joint cost to the three products using the sales value at split-off method. (Round proportions to the nearest whole percentage.)
c. Assume that the ground beef could be processed into sausage that could be sold for $2.10 per pound to a distributor that wants a special label costing $0.15 per pound attached to the sausage. If Indianola Beef uses the sales value at split-off method to allocate joint cost, what is the maximum separate cost of processing that the company could incur to still appear to earn $0.40 per pound upon the sale?
For interim computations, carry amounts out to two decimal places. Round your final answer to two decimal places.