Orange Paper Company Processes Wood Pulp into Two Products

Essay

Orange Paper Company processes wood pulp into two products.During April the joint costs of processing were $132,000.Production and sales value information for the month were as follows:
Paper sells for $2.65 a kilogram and cardboard sells for $3.40 a kilogram.There were no beginning or ending inventories for April.Required:
1.Determine the amounts to be allocated to each product using the:
2.If the cardboard is sold at the splitoff point then the post splitoff factory capacity can be renovated and leased for the year.The cost of the renovation is budgeted at $125,000 and the annual lease revenue will be $165,000.Determine if it is more profitable for the cardboard to be sold at the splitoff point or at the end of production.