Reference no: EM132977272

Bluefield Corp. (Bluefield) produces two joint products: X and Y, as well as a byproduct, Z, from processing input ABC. Bluefield uses the estimated net realizable value method to allocate costs of the joint process. Three departments (Cutting, Slicing, and Crushing) are involved in the processing of these products. There is NO spoilage in the Cutting and Slicing departments. The Cutting department processes 87,000 kilograms (kg) of input ABC, at a total cost of $160,000. After processing in the Cutting department, 40% of the material is transferred to the Slicing department for Product X and Byproduct Z, and 60% is transferred to the Crushing department for Product Y. The Slicing department further processes the material at a total additional cost of $18,000. After processing, 32,000 kg of Product X is produced and ready for sale at a price of $4 per kg. The remainder processed in the Slicing department is Byproduct Z, which is sold at $1 per kg. Marketing expenses related to the sale of all Byproduct Z produced are $1,000. The Crushing department processes Product Y at a total additional cost of $103,600. In the Crushing department, normal spoilage is equal to 10% of good output of Product Y. The remaining good output of Product Y is then sold for $7 per kg. Bluefield's internal policy is that the net realizable value of a byproduct reduces the related joint costs.

Required:

Problem a) Allocate the $160,000 joint costs to Product X and Product Y, using the net realizable value method.

Problem b) Assume that Product X can be sold at the split-off point for $3 per kg. Determine whether Bluefield should further process Product X.