Allocate the joint cost to the soy cookies

Reference no: EM132475057

Case Study

(Question: 16-28 Joint-cost allocation: Sell immediately or process further. Nervana Soy Products (NSP) buys soybeans and processes them into other soy products. Each ton of soybeans that NSP purchases for $350 can be converted for an additional $210 into 650 pounds of soy meal and 100 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.32 and soy oil can be sold in bulk for $4.50 per gallon.

NSP can process the 650 pounds of soy meal into 750 pounds of soy cookies at an additional cost of $300. Each pound of soy cookies can be sold for $2.32 per pound. The 100 gallons of soy oil can be packaged at a cost of $230 and made into 400 quarts of Soyola. Each quart of Soyola can be sold for $1.15.

1. Allocate the joint cost to the soy cookies and the Soyola using the following:
a. Sales value at splitoff method
b. NRV method

2. Should NSP have processed each of the products further? What effect does the allocation method have on this decision?

Attachment:- Case Study.rar

Reference no: EM132475057

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