Problem:
Biondi Industries is a manufacturer of chemicals for various purposes. One of the processes used by them is HTP-3 a chemical used in hot tubs and swimming pools; PST-4 a chemical used in pesticides; and RJ-5 a product that is sold to fertilizer manufacturers.
Biondi uses the net-realizable-value method to allocate joint production costs. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Biondi uses FIFO in valuing its finished good inventories.
Data regarding Biondi's operation for the month of October are as follows. During this month Biondi incurred joint production costs of $1,7000,000 in the manufacture of HTP-3, PST-4, and RJ-5.
Finished goods inventory in gallons October 1 18,000 52,000 3,000
October sales in gallons 650,000 325,000 150,000
October production in gallons 700,000 350,000 170,000
Additional processing costs $874,000 $816,000 $60,000
Final sales value per gallon $4.00 $6.00 $5.00
Chemicals used HTP -3 PST -4 RJ-5
Q1. Determine Biondi's allocation of joint production costs for the month of October, and carry calculation of relative proportions for 4 decimal places
Q2. Determine the dollar values of the finished goods inventories for HTP-3, PST-4, and RJ-5 as of October 31. Round the cost per gallon to the nearest cent.
Q3. Suppose Biondi has a new opportunity to sell PST-4 at the split off point for $3.90 per gallon. Prepare an analysis showing whether the company should sell PST-4 at the split off point or continue to process this product further.