Cooper Chemical Company processes a material to yield three chemicals: A, B, and C. These chemicals are sold to pharmaceutical companies to produce pain killer and other medications. Cooper purchased 10,000 gallons of material and processed this material to yield chemicals A, B, C. The joint cost was $220,000. The sales and production information are as follows:
|
Joint Products |
Gallons Produced |
Price at Split-off |
Further Processing Cost per gallon |
Price after further processing |
|
A |
2,000 |
$55 |
||
|
B |
5,000 |
$40 |
||
|
C |
3,000 |
$30 |
$5 |
$60 |
Product C can be processed further and sold at a higher price.
(a) Allocate the joint cost $220,000 to A , B, and C using physical method, the sales value at split-off method, the net realizable value method, and the constant gross margin percentage method.
(b) Cooper Chemical is planning on further processing Chemical B to another costlier Chemical B+ with further processing cost $30/gallon and selling price after further processing $50. Should Cooper Chemical invest on this plan?
