Reference no: EM133115682

Question 1 - A company produces two joint products (called 301 and 302) in a single operation that uses one raw material called Fruge. The company purchased 400 gallons of Fruge at a cost of $800 and used them to produce 150 gallons of Product 301, selling for $5 per gallon, and 75 gallons of Product 302, selling for $15 per gallon. How much of the $800 cost should be allocated to each product using the value basis of allocation?

Question 2 - A company currently pays an outside supplier $30 per unit for a part for one of its products. The company is considering two alternative methods of making the part. Method 1 for making the part would require direct materials of $10 per unit, direct labor of $16 per unit, and incremental overhead of $6 per unit. Method 2 for making the part would require direct materials of $10 per unit, direct labor of $4 per unit, and incremental overhead of $14 per unit.

(1) Compute the cost per unit for each alternative method of making the part.

(2) Should the company make or buy the part? If the company makes the part, which production method should it use?