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Joint Products, Inc., produces two joint products, X and V, using a common input. These are produced in batches. The common input costs $8,000 per batch. To produce the final products (X and V), additional processing costs beyond the split-off point must be incurred. There are no beginning inventories. The accompanying data summarized the operation.
Quantities produced per batch 200lbs 400lbs Additional processing costs per batch beyond split-off $1,800 $3,400 Unit selling prices of completely processed products $40/lb $10/lb Ending inventory 2,000 lbs 1,000lb
a. Compute the full cost of the ending inventory using net realizable value to allocate joint cost.
b. If the selling prices at teh split-off point (before further processing) are $35 and $1 per pound of X and V, respectively, what should the firm do regarding further processing?