What effect does the allocation method have on this decision

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Problem

Carichem Company produces sanitation products after processing specialized chemicals. The following relates to its activities: 1 Kilogram of chemicals purchased for $4000 and with an additional $2000 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 $2 and the Cleaning agent can be sold for $8 per litre. At an additional cost of $800, Carichem can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $4 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $600 and made into 200 packs of Softener that can be sold for $4 per pack. Get the instant assignment help.

Task

I. Allocate the joint cost to the Detergent and the Softener using the following: (i) Sales value at split-off method. (ii) NRV method.

II. Should Carichem have processed each of the products further? What effect does the allocation method have on this decision?

Reference no: EM133900783

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