Ojai Chemical Manufactures Two Industrial Chemicals in a Joint Process

Essay

Ojai Chemical manufactures two industrial chemicals in a joint process. In October, $200,000 of direct materials were processed at a cost of $300,000, resulting in 16,000 pounds of Pentex and 4,000 pounds of Glaxco. Pentex sells for $35 per pound and Glaxco sells for $60 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 $7.50 per pound, with the resulting product, Pentex-R, selling for $45 per pound. Glaxco is processed separately at a cost of $10 per pound, and the resulting product, Glaxco-R, sells for $100 per pound.
Required:
A. Compute the company's total joint production costs.
B. Assuming that total joint production costs amounted to $500,000, allocate these costs by using:
1. The physical-units method.
2. The relative-sales-value method.
3. The net-realizable-value method.