Caribu Company produces sanitation products after processing specialized chemicals; The following relates to its activities: 1 Kilogram of chemicals purchased for $2000 and with an additional $1000 is processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a gram of Crystal can be sold for $1 and the Cleaning agent can be sold for $4 per litre. At an additional cost of $400, Caribu can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $2 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $300 and made into 200 packs of Softener that can be sold for $2 per pack. 1. Allocate the joint cost to the Detergent and the Softener using the following: a. Sales value at split-off method b. NRV method ] 2. Should Caribu have processed each of the products further? What effect does the allocation method have on this decision?
Caribu Company produces sanitation products after processing specialized chemicals; The
following relates to its activities:
1 Kilogram of chemicals purchased for $2000 and with an additional $1000 is
processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a
gram of Crystal can be sold for $1 and the Cleaning agent can be sold for $4 per litre.
At an additional cost of $400, Caribu can process the 400 grams of Crystal into 500
grams of Detergent that can be sold for $2 per gram. The 80 litres of Cleaning agent is
packaged at an additional cost of $300 and made into 200 packs of Softener that can
be sold for $2 per pack.
1. Allocate the joint cost to the Detergent and the Softener using the following:
a. Sales value at split-off method
b. NRV method ]
2. Should Caribu have processed each of the products further? What effect does the allocation
method have on this decision?
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