Question: Rain, Inc., is a large food-processing company. It processes 157,000 pounds of peanuts in the peanuts department at a cost of $303,100 to yield 25,000
Rain, Inc., is a large food-processing company. It processes 157,000
pounds of peanuts in the peanuts department at a cost of $303,100
to yield 25,000 pounds of product A, 99,000 pounds of product B, and 14,000 pounds of product C.
| Product A is processed further in the salting department to yield 25,000 pounds of salted peanuts at a cost of $36,000 and sold for $12 per pound. | |||||
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| Product B (raw peanuts) is sold without further processing at $4 per pound.
Product C is considered a byproduct and is processed further in the paste department to yield 14,000 pounds of peanut butter at a cost of $13,000 and sold for $7 per pound.
The company wants to make a gross margin of 10% of revenues on product C and needs to allow 20% of revenues for marketing costs on product C. An overview of operations follows:
Joint Costs $303,100
Peanuts Department processing of 157,000 lb
Separable costs 25,000 pounds Salting Department processing $36,000
14,000 pounds Paste Department processing $13000
Salted Peanuts 25,000 pounds $12/lb Raw peanuts 99,000 pounds $4/lb Peanut butter 14,000 pounds $7/lb
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