16-23 Joint cost allocation: Sell immediately or processfurther. Illinois Soy Products (ISP) buys soybeans and processesthem into other soy products. Each ton of soybeans that ISPpurchases for $340 can be converted for an additional $190 into 575pounds of soy meal and 160 gallons of soy oil. A pound of soy mealcan be sold at splitoff for $1.24 and soy oil can be sold in bulkfor $4.25 per gallon.ISP can process the 575 pounds of soy mealinto 725 pounds of soy cookies at an additional cost of $380. Eachpound of soy cookies can be sold for $2.24 per pound. The 160gallons of soy oil can be packaged at a cost of $240 and made into640 quarts of Soyola. Each quart of Soyola can be sold for$1.35.
1.Allocate the joint cost to the cookies and the Soyola usingthe following:a.Sales value at splitoff methodb.NRV method
2. Should ISP have processed each of the products further? Whateffect does the allocation method have on this decision?
16-23 Joint cost allocation: Sell immediately or processfurther. Illinois Soy Products (ISP) buys soybeans and processesthem into other soy products. Each ton of soybeans that ISPpurchases for $340 can be converted for an additional $190 into 575pounds of soy meal and 160 gallons of soy oil. A pound of soy mealcan be sold at splitoff for $1.24 and soy oil can be sold in bulkfor $4.25 per gallon.ISP can process the 575 pounds of soy mealinto 725 pounds of soy cookies at an additional cost of $380. Eachpound of soy cookies can be sold for $2.24 per pound. The 160gallons of soy oil can be packaged at a cost of $240 and made into640 quarts of Soyola. Each quart of Soyola can be sold for$1.35.
1.Allocate the joint cost to the cookies and the Soyola usingthe following:a.Sales value at splitoff methodb.NRV method
2. Should ISP have processed each of the products further? Whateffect does the allocation method have on this decision?
