Efrem Food Products Inc. (EFPI) produces various food products. One of its joint products is soybean that is processed in a joint manufacturing process to produce Soybean Oil and the Meal. The total cost of input and joint manufacturing process is estimated to be $400,000 for 2020. During the year the company expects to produce 45,000 units of Soybean Oil and 35,000 units of Meal. The company has an option to sell Soybean Oil and the Meal at the split-off point for $10 and $15 per unit respectively.

Required:     

1. Allocate the joint manufacturing cost to Soybean Oil and the Meal using the physical unit method.

2. Allocate the joint manufacturing cost to Soybean Oil and the Meal using the sales value method.

3. An Aged Care facility approached EFPI and offered to buy the Meal at a price of $17 per unit provided the company agrees to further process the product. The accountant of EFPI advised that it would cost $60,000 to further process the Meal. As a qualified management accountant, you are required to evaluate and advise EFPI whether the offer from the Aged Care facility should be accepted or rejected on financial grounds. Show computations to support your answer.

Answer rating: 100% (QA)

1 Physical Unit Method Product Physical Units Allocation Ratio Allocation of Joint Cost So... View the full answer