Good Earth Products produces orange juice and candied orange peels. A 1,000-pound batch of oranges, costing $480, is transformed using labor of $60 into 100 pounds of orange peels and 300 pints of juice. The company has determined that the sales value of 100 pounds of peels at the split-off point is $350, and the value of a pint of juice (not pasteurized or bottled) is $0.4. Beyond the split-off point, the cost of sugar-coating and packaging the 100 pounds of peels is $50. The cost of pasteurizing and packaging the 300 pints of juice is $250. A 100-pound box of candied peels is sold to commercial baking companies for $610. Each pint of juice is sold for $1.66.
a. Allocate joint costs using the relative sales values at the split-off point, and calculate the profit per 100-pound box of sugar-coated peels and the profit per pint of juice.
(Round profit per pint of juice to 2 decimal places, e.g. 15.25 and other answers to 0 decimal places, e.g. 5,725. Round intermediate calculations to 4 decimal places, e.g. 0.6254.)
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Allocation of joint costs to sugar-coated peels
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$
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Allocation of joint costs to juice
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$
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Profit per 100-pound box of sugar-coated peels
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$
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Profit per pint of juice
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$
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b. What is the incremental benefit (cost) to the company of sugar-coating the peels rather than selling them in their condition at the split-off point?
$ -------------------------