Question

Salt Company manufactures products J, K, and L in a joint process. The company
incurred $480,000 of joint processing costs during the period just ended and had the
following data that related to production:

An analysis revealed that all costs incurred after the split-off point are variable and
directly traceable to the individual product line.
Required:
A. If Salt allocates joint costs based on the products' sales values at the split-off
the point, what amount of joint cost would be allocated to product J?
B. If the production of J totaled 50,000 gallons for the period, determine the relevant cost
per gallon that should be used in decisions that explore whether to sell at the split-off
point or process further? Briefly explain your answer.
C. At the beginning of the current year, Salt decided to process all three products
beyond the split-off point. If the company desired to maximize income, did it err in
regards to its decision with any of the products and by how much?

 

Sales Values and Additional
Cost if Processed Beyond Split-off
Sales Value
$550,000
540,000
975,000
Sales Value at Split-off
$400,000
350,000
850,000
Additional Cost
$130,000
240,000
118,000
Product
K
L
Expand
Transcribed Image Text

Sales Values and Additional Cost if Processed Beyond Split-off Sales Value $550,000 540,000 975,000 Sales Value at Split-off $400,000 350,000 850,000 Additional Cost $130,000 240,000 118,000 Product K L

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