Reference no: EM132474008

Problem - Joint Costs and Additional Processing

Good Earth Products produces orange juice and candied orange peels. A 1,000-pound batch of oranges, costing $500, is trans- formed using labor of $50 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 $0.40. Beyond the split-off point, the cost of sugar-coating and packaging the 100 pounds of peels is $60. 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 $600. Each pint of juice is sold for $1.75.

Required -

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 to the nearest dollar.

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?

c. What is the incremental benefit (cost) to the company of pasteurizing and packaging a pint of juice rather than selling the juice at the split-off point?