Reference no: EM132812945

Question - Ontario Soy Products (OSP) buys soy beans and processes them into other soy products. Each tonne of soy beans that OSP purchases for $380 can be converted for an additional$220 into 625 lbs of soy meal and 160 gallons of soy oil. A pound of soy meal can be sold at split-off for $1, and soy oil can be sold in bulk for $4.75 per gallon.

OSP can process the 625 lbs of soy meal into 725 lbs of soy cookies at an additional cost of $370. Each pound of soy cookies can be sold for $2 per pound. The 160 gallons of soy oil can be packaged at a cost of $240 and made into 640 quarts of Soyola. Each quart of Soyola can be sold for $1.15.

Required -

1. Allocate the joint cost to the cookies and the Soyola using:

a. Sales value at split-off method

b. NRV method

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