Breakfast time Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows:

Joint Cost			Cereal	Quantity at Split-Off Point			Sales Price per Kilogram
$	95,000		Yummies		12,500	kilograms	$	6.50
			Crummies		8,500	kilograms		8.00

Breakfast time Cereal Company has an opportunity to process its Crummies further into a mulch for ornamental shrubs. The additional processing operation costs $2.00 per kilogram, and the mulch will sell for $13.00 per kilogram.

Required:

1-a.	Compute the net incremental revenue per kilogram if management decide to process Crummies into the mulch. (Round your answer to 2 decimal places.)

1-b.

Should Breakfasttime’s management decide to process Crummies into the mulch?

	Yes
	No

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 the Yummies.

Answer rating: 100% (QA)

Answer 1a To compute the net incremental revenue per kilogram we need to compare the additional revenue from processing Crummies into mulch with the a... View the full answer