Assignment Task: In a certain production process 100,000 kg of a single raw material were processed at a cost of $250,000. 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:
Problem 1: If A was allocated $187,500 of the joint production costs under the net realizable value method, what was the selling price of D?
Problem 2: 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?