AlbertaAlberta

Soy Products

$($Upper AA$$SP$)$

buys soy beans and processes them into other soy products. Each tonne of soy beans that

Upper AASP

purchases for

$$320$

can be converted for an additional

$$220$

into

$700$

lbs of soy meal and

$140$

gallons of soy oil. A pound of soy meal can be sold at splitoff for

$$1\mathrm{.}36,$

and soy oil can be sold in bulk for

$$4\mathrm{.}75$

per gallon.

Upper AASP

can process the

$700$

lbs of soy meal into

$800$

lbs of soy cookies at an additional cost of

$$320.$

Each pound of soy cookies can be sold for $$2\mathrm{.}36$

per pound. The $140$

gallons of soy oil can be packaged at a cost of

$$200$

and made into

$560$

quarts of Soyola. Each quart of Soyola can be sold for

$$1\mathrm{.}35.$

Required

Allocate the joint cost to the cookies and the Soyola$$ using:

Sales value at splitoff method

NRV method

Should the company have processed each of the products$$ further? What effect does the allocation method have on this$$ decision?