Joint Products, Inc., produces two joint products, X and V, using a common input. These are produced in batches. The common input costs $8,000 per batch. To produce the final products (X and V), additional processing costs beyond the split-off point must be incurred. There are no beginning inventories. The accompanying data summarize the operations
- Quantities produced per batch 200 lbs 400 lbs
- Additional processing costs per batch
- beyond split-off $1,800 $3,400
- Unit selling prices of completely
- processed products $40/lb $10/lb
- Ending inventory 2,000 lbs 1,000 lbs
Required:
a. Compute the full cost of the ending inventory using net realizable value to allocate joint cost.
b. If the selling prices at the split-off point (before further processing) are $35 and $1 per pound of X and V, respectively, what should the firm do regarding further processing? Show calculations.