Chemical Processors use a joint process to produce two types of base paint, Regular and Premium. Joint costs amount to $60,000 per batch of output. Each batch totals 12,000 litres, 60% Regular and 40% Premium. Both products are processed further without gain or loss in volume. Data about further processing are as follows:
Selling Price
Separable Costs After Further Processing
Regular $1.00 per litre $15.00 per litre
Premium $3.00 per litre $20.00 per litre
a)Allocate the joint costs according to the physical output method (number of litres at the split-off point).
b)Allocate the joint costs according to the net realizable value method.
c)The Company has discovered an additional process by which the Regular can be made into a high quality stain and mildew-proof paint called Durable. This paint is especially suited for bathrooms and kitchens. The new selling price would be $28 per litre. Additional processing would increase separable costs by $11.00 (in addition to the $1.00 separable cost required to produce regular). Assuming no other changes in cost, should the company begin producing Durable? Provide calculations to support your answer.
d)Identify a qualitative factor that could affect the decision in part (c).

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The Answer of Chemical Processors use a joint process to produce two types of base paint, Regular and Premium. Joint costs amount to $60,000 per batch of output. Each batch totals 12,000 litres, 60% Regular and 40% Premium. Both products are processed further without gain or loss in volume. Data about further processing are as follows:
Selling Price
Separable Costs After Further Processing
Regular $1.00 per litre $15.00 per litre
Premium $3.00 per litre $20.00 per litre
a)Allocate the joint costs according to the physical output method (number of litres at the split-off point).
b)Allocate the joint costs according to the net realizable value method.
c)The Company has discovered an additional process by which the Regular can be made into a high quality stain and mildew-proof paint called Durable. This paint is especially suited for bathrooms and kitchens. The new selling price would be $28 per litre. Additional processing would increase separable costs by $11.00 (in addition to the $1.00 separable cost required to produce regular). Assuming no other changes in cost, should the company begin producing Durable? Provide calculations to support your answer.
d)Identify a qualitative factor that could affect the decision in part (c).

Chemical Processors Use a Joint Process to Produce Two Types