Skanda Corporation manufactures two chemicals (Flextra and Hydro) in a joint process. Data from a recent month follow.
Direct materials used $360,000
Direct labor $150,000
Manufacturing overhead $690,000
Flextra 40,000 gallons
Hydro 120,000 gallons
Flextra sells for $15 per gallon and Hydro sells for $20 per gallon.
1. Compute the total joint costs to be allocated.
2. Compute the joint costs that would be allocated to Flextra by using the physical-units method.
3. Compute the joint costs that would be allocated to Hydro by using the relative-sales-value method.
4. Assume that Hydro can be converted into a more refined product, Hydro-R, in a totally separable process at an additional cost of $4 per gallon. If the refined product can be sold in the marketplace for $26 per gallon, should Skanda process do the additional processing? Briefly explain.
The expert examines a joint costs for Skanda Corporation. The total joint costs are determined.