Breakfasttime Cereal Company manufactures two breakfast cereals in a joint proce

Question

Breakfasttime Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows:

  

Breakfasttime Cereal Company has an opportunity to process its Crummies further into a mulch for ornamental shrubs. The additional processing operation costs $1.70 per kilogram, and the mulch will sell for $11.50 per kilogram.

Compute the net incremental revenue per kilogram if management decide to process Crummies into the mulch. (Round your answer to 2 decimal places.)

           

Yes

No

Suppose the company does process Crummies into the mulch. Use the net-realizable-value method to allocate the joint production cost between the mulch and the Yummies. (Round your calculation of relative proportions to 3 decimal places.)

       

Breakfasttime Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows:

Explanation / Answer

Solution 1:

As there is net incremental revenue of $2.10, therefore Crummies should be further processed.

Solution 2:

Computation of incremental revenue per Kg if Curmmies further processed in to Mulch Particulars Amount Selling price per Kg after further processing $11.50 Less: Selling price at split off point per Kg $7.70 Less: Further Procesing Cost per Kg $1.70 Incremental Profit (Loss) Per Kg $2.10

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