Breakfast time Cereal Company has an opportunity to process its Crummies further into mulch for ornamental shrubs. The additional processing operation costs $.50 per kilogram and the mulch will sell for $3.50 per kilogram.

Required:
1. Should Breakfast time’s management decide to process Crummies into the mulch? Why?
2. Suppose the company does process Crummies into the mulch. Use the net-realizable-value method to allocate the joint production cost between the mulch and theYummies.

Transcribed Image Text:

Joint Cost Cereal Quantity at Split-Off Point Sales Price per Kilogram $2.00 2.50 $30,000 Yummies 12,000 kilograms. 8,000 kilograms. Crummies..