Question: By-Product Costing Yakima Vineyards buys grapes from local orchards and presses them to produce grape juice for wine making. The pulp that remains after pressing is sold to farmers as livestock food. This livestock food is accounted for as a by-product. During the 20X1 fiscal year, the company paid $1 million to purchase 4 million pounds of grapes. After processing, 1 million pounds of pulp remained. Yakima spent $40,000 to package and ship the pulp, which was sold for $50,000.
1. How much of the joint cost of the grapes is allocated to the pulp?
2. Compute the total inventory cost (and therefore the cost of goods sold) for the pulp.
3. Assume that $130,000 was spent to press the grapes and $150,000 was spent to filter, pasteurize, pack, and ship the juice to wineries in the Puget Sound area. Compute the total cost of the grape juice produced.