Question: Illinois Soy Products ISP buys soybeans and processes them into

Illinois Soy Products (ISP) buys soybeans and processes them into other soy products. Each ton of soybeans that ISP purchases for $ 340 can be converted for an additional $ 190 into 575 pounds of soy meal and 160 gallons of soy oil. A pound of soy meal can be sold at splitoff for $ 1.24 and soy oil can be sold in bulk for $ 4.25 per gallon. ISP can process the 575 pounds of soy meal into 725 pounds of soy cookies at an additional cost of $ 380. Each pound of soy cookies can be sold for $ 2.24 per pound. The 160 gallons of soy oil can be packaged at a cost of $ 240 and made into 640 quarts of Soyola. Each quart of Soyola can be sold for $ 1.35.

1. Allocate the joint cost to the cookies and the Soyola using the following:
a. Sales value at splitoff method
b. NRV method
2. Should ISP have processed each of the products further? What effect does the allocation method have on this decision?

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  • CreatedMay 14, 2014
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