Reference no: EM133164487

Question - Klippan Products obtains the intermediate products A and B from a joint process.  During April, the joint processing costs were $365,000 to obtain 200,000 feet of product A and 600,000 feet of B.  These intermediate products were further processed without any shrinkage to the final products AA and BB, respectively. The final selling prices were $0,90 and $1.10 per foot and the separable costs of further processing were $50,000 and $40,000 respectively.

What are the joint costs allocated to AA and BB using the constant gross margin approach to cost allocation? Please carry at least three decimal places in any rates you may use. Otherwise rounding error can be substantial.

While Klippan did not sell the intermediate products, they could have been sold for $0.80 and $1.00 a foot, respectively. Could Klippan have increased its operating income by a change in its decision to further process its intermediate products?

If so, which products should they have sold at the intermediate and final stages?