Joint costing - decision making
Create a spreadsheet solution to the following problem. Scan or use your phone to capture an image and paste a copy of your manual solution in your assignment submission. Also paste a spreadsheet solution showing the row and column headings and the formula view. Your report should be completely formula driven.
Joint cost allocation: additional processing beyond split-off point
In a certain production process 100 000 kg of a single raw material were processed at a cost of $350 000. At split-off two intermediate products, A and B emerged, weighed as 60 000 kg of A and 40 000 kg of B. A was processed further at a cost of $45 000 to produce C, and B was processed further at a cost of $25 000 to produce D. C sold for $4.50 per kg.
Required:
(a) If A was allocated $187 500 of the joint production costs under the net realisable value method, what was the selling price of D?
(b) Suppose the firm receives an offer to buy all of product A for $2 per kg at the split-off point. Would the firm be better off selling A or processing further to produce C? By how much?