California Soy buys soy beans and processes them into soy meal and soy oil. One ton of soy beans can be processed into 60 gallons of soy meal and 90 gallons of soy oil at a cost of $500. A gallon of soy meal can be sold for $2.00. A gallon of soy oil can be sold (in bulk) for $4.00.
California Soy then processes the 60 gallons of soy meal into 500 pounds of soy cookies at an additional cost of $300.00. Soy cookies are sold for $2.00 per pound. The 90 gallons of soy oil is ultimately packaged (at a cost of $200.00) into 400 quarts of Soyola. Each quart of Soyola is sold for $1.25.
Assuming every pound of cookies and all quarts of Soyola produced made from a ton of soy beans are sold,
a.) What would gross profit be for Soy Cookies under the physical unit method?
b.) What would gross profit be for Soy Cookies under the sales value at split-off method?
c.) What would gross profit be for Soyola under the Net Realizable Value method?
d.) What is the incremental profit (or loss) for California Soy when soy meal is further processed into soy cookies?
e.) What is the incremental profit (or loss) for California Soy when soy oil is further processed into Soyola?