Problem 17-87 Lowrey Chemical manufactures two... Lowrey Chemical manufactures two industrial chemicals in a joint...
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Problem 17-87 Lowrey Chemical manufactures two...
Lowrey Chemical manufactures two industrial chemicals in a joint process. In October, $400,000 of direct materials were processed at a cost of $500,000, resulting in 6,000 pounds of Pentex and 14,000 pounds of Glaxco. Pentex sells for $40 per pound and Glaxco sells for $70 per pound. Management generally processes each of these chemicals further in separable processes to manufacture more refined products. Pentex is processed separately at a cost of $10.00 per pound, with the resulting product, Pentex-R, selling for $50 per pound. Glaxco is processed separately at a cost of $20 per pound, and the resulting product, Glaxco-R, sells for $80 per pound.
Required:
Compute the company's total joint production costs.
Assuming that total joint production costs amounted to $900,000, allocate these costs by using: (1) The physical-units method; (2) The relative-sales-value method; (3) The net-realizable-value method.
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