Formula,Inc. ,processes sugar into candy and powdered drink mix.The sugar costs $61,000 per load.The process involves mixing the sugar for 2 hours,producing 60,000 packs of candy with a market value of $25,000,and 20,000 packs of drink mix with a market value of $100,000.The joint cost of the mixing process is $28,600.
Required:
a.If the sugar and the mixing process costs are to be allocated on the basis of units of output,what cost is assigned to each product?
b.If the sugar and the mixing process costs are allocated on the basis of the net realizable value,what cost is assigned to each product?
c.How much profit or loss does the candy product provide using the data in this problem and your analysis in requirement (a)? Is it really possible to determine which product is more profitable? Explain why or why not.

Question

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The Answer of Formula,Inc. ,processes sugar into candy and powdered drink mix.The sugar costs $61,000 per load.The process involves mixing the sugar for 2 hours,producing 60,000 packs of candy with a market value of $25,000,and 20,000 packs of drink mix with a market value of $100,000.The joint cost of the mixing process is $28,600.
Required:
a.If the sugar and the mixing process costs are to be allocated on the basis of units of output,what cost is assigned to each product?
b.If the sugar and the mixing process costs are allocated on the basis of the net realizable value,what cost is assigned to each product?
c.How much profit or loss does the candy product provide using the data in this problem and your analysis in requirement (a)? Is it really possible to determine which product is more profitable? Explain why or why not.