Reference no: EM132955969

Question - Jets Corporation produces two products from crude oil (fuel and oil) from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Joint manufacturing costs for the year were $63,000. Sales values and costs were as follows:

If Processed Further

Product Units Made Sales Price at Split-Off Sales Value Separable Cost

Fuel 9,000 $ 45,000 $ 83,000 $ 10,500

Oil 6,000 90,000 100,000 7,500

Required -

a. If the joint production costs are allocated based on the relative-sales-value method, what amount of joint cost would be assigned to the Fuel?

b. If both products are processed beyond the split-off point, what amount of joint cost (rounded to the nearest dollar) would be allocated to the Fuel based on the relativesales-value method?

c. Which option is more profitable in the case of Fuel? Show calculations for both options.