Joint production decisions
Grassy Fertilizer manufactures two lines of garden grade fertilizer as part of a joint production process: GF10 and GF20.Joint costs up to the split-off point total $85,000 per batch.These joint costs are allocated to GF10 and GF20 in proportion to their relative sales values at the split-off point of $40,000 and $60,000,respectively.
Both lines of garden grade fertilizer can be further processed into commercial grade fertilizer.The following table summarizes the costs and revenue associated with additional processing of GF10 and GF20:
(a)The $85,000 in joint costs should be allocated to each product as follows:
GF10 $________,GF20 $________
(b)Which product (GF10 or GF20)would result in a net decrease in operating income if processed into a commercial grade fertilizer?
________
(c)Which product (GF10 or GF20)would result in a net increase in operating income if processed into a commercial grade fertilizer?
________

Question

Joint production decisions
Grassy Fertilizer manufactures two lines of garden grade fertilizer as part of a joint production process: GF10 and GF20.Joint costs up to the split-off point total $85,000 per batch.These joint costs are allocated to GF10 and GF20 in proportion to their relative sales values at the split-off point of $40,000 and $60,000,respectively.
Both lines of garden grade fertilizer can be further processed into commercial grade fertilizer.The following table summarizes the costs and revenue associated with additional processing of GF10 and GF20:
  (a)The $85,000 in joint costs should be allocated to each product as follows:
GF10 $________,GF20 $________
(b)Which product (GF10 or GF20)would result in a net decrease in operating income if processed into a commercial grade fertilizer?
________
(c)Which product (GF10 or GF20)would result in a net increase in operating income if processed into a commercial grade fertilizer?
________

Quizplus · Accepted Answer

The Answer of Joint production decisions
Grassy Fertilizer manufactures two lines of garden grade fertilizer as part of a joint production process: GF10 and GF20.Joint costs up to the split-off point total $85,000 per batch.These joint costs are allocated to GF10 and GF20 in proportion to their relative sales values at the split-off point of $40,000 and $60,000,respectively.
Both lines of garden grade fertilizer can be further processed into commercial grade fertilizer.The following table summarizes the costs and revenue associated with additional processing of GF10 and GF20:
  (a)The $85,000 in joint costs should be allocated to each product as follows:
GF10 $________,GF20 $________
(b)Which product (GF10 or GF20)would result in a net decrease in operating income if processed into a commercial grade fertilizer?
________
(c)Which product (GF10 or GF20)would result in a net increase in operating income if processed into a commercial grade fertilizer?
________

Joint Production Decisions Grassy Fertilizer Manufactures Two Lines of Garden Grade Fertilizer as Grade