Question: PROBLEM 7-12. Joint Costs and Additional Processing Good Earth Products produces orange juice and candied orange peels. A 1,000 pound batch of oranges, costing $400,

PROBLEM 7-12. Joint Costs and Additional Processing Good Earth Products produces orange juice and candied orange peels. A 1,000 pound batch of oranges, costing $400, is transformed using labor of $40 into 100 pounds of orange peels and 300 pints of juice.

The company has determined that the sales value of 100 pounds of peels at the splitoff point is $300 and the value of a pint of juice (not pasteurized or bottled) is $0.30.

Beyond the split-off point, the cost of sugar-coating and packaging the 1 00 pounds of peels is $50. The cost of pasteurizing and packaging the 300 pints of juice is $150.

A 100 pound box of candied peels is sold to commercial baking companies for

$500. Each pint of juice is sold for $1.

Required

a. Allocate joint costs using the relative sales values at the split-off point and calculate the profit per 100 pound box of sugarcoated peels and the profit per pint of juice.

b. What is the incremental benefit (cost) to the company of sugarcoating the peels rather than selling them in their condition at the split-off point?

c. What is the incremental benefit (cost) to the company of pasteurizing and packaging a pint of juice rather than selling the juice at the split-off point?

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