Question

Metro Blood Bank, a for- profit firm, collects whole blood from donors, tests it, and then separates it into two components: platelets and plasma. Three pints of whole blood yield two pints of platelets and one pint of plasma. The cost of collecting the three pints, testing them, and separating them is $ 300.
The platelets are sold for $ 165 per pint. But before they are sold they must be packaged and labeled. The variable cost of this additional processing is $ 15 per pint. Plasma is sold for $ 115 per pint after incurring additional variable processing costs of $ 45 per pint.
The selling prices of the platelets and plasma are set by competitive market forces. The prices of platelets and plasma quoted above are the current market prices, but they vary widely depending on supply and demand conditions. Metro Blood Bank ships its products nationwide to maximize profits. It has three operating divisions: blood collection and processing, platelets, and plasma. Collection and processing is a cost center, and platelets and plasma are profit centers. Neither platelets nor plasma has any commercial value without further processing.

Required:
a. Prepare two statements showing the profits per pint of platelets and plasma with collection and processing costs assigned using (1) The number of pints of platelets and plasma produced from the whole blood. (2) The net realizable value of platelets and plasma.
b. Discuss the advantages and disadvantages of each of the methods in (a) for assigning collection and processing costs to the blood products.



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  • CreatedDecember 15, 2014
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