all further processing costs amount to 35 000 the selling price for the veterinary g 649385

JOINT COST ALLOCATION, FURTHER PROCESSING Sanders Pharmaceutical Company purchases a material which is then processed to yield three chemicals: anarol, estyl, and betryl. In June, Sanders purchased 10,000 gallons of the material at a cost of $250,000, and the company incurred joint conversion costs of $70,000. June sales and production information are as follows:

Anarol and estyl are sold to other pharmaceutical companies at the split off point. Betryl can be sold at the split off point or processed further and packaged for sale as an asthma medication.

Required:

1. Allocate the joint costs to the three products using the physical units method, the sales value at split off method, the net realizable value method, and the constant gross margin percentage method.

2. Suppose that half of June’s production of estyl could be purified and mixed with all of the anarol to produce a veterinary grade anesthetic. All further processing costs amount to $35,000. The selling price for the veterinary grade anarol is $112 per gallon. Should Sanders further process the estyl into the anarol anesthetic?