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Question - Hovart Corporation manufactures two products out of a joint process: Compod and Ultrasene. The joint costs incurred are P2,500,000 for a standard production run that generates 120,000 gallons of Compod and 80,000 gallons of Ultrasene. Compod sells for P20 per gallon while Ultrasene sells for P32.5 per gallon.
Suppose the following additional processing costs are required beyond split-off point in order to obtain Compod and Ultrasene: P1 per gallon for Compod and P11 per gallon of Ultrasene. Suppose also, Compod can be processed further into a product called Compodalene, at an additional cost of P4 per gallon. Compodalene will be sold for P26 per gallon by independent distributors. The distributor's commission will be 10% of sales price. Should Hovart sell Compod or Compodalene? Why?
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