The Delicious Canning Company Processes Tomatoes into Ketchup, Tomato Juice

question 131

Essay

The Delicious Canning Company processes tomatoes into ketchup, tomato juice, and canned tomatoes. During the summer, the joint costs of processing the tomatoes were $420,000. There were no beginning or ending inventories for the summer. Production and sales value information for the summer were as follows:
$\begin{array}{llrr}\text {Product}&\text {Cases}&\text {Additional Costs}&\text {Selling Price}\\ \text { Ketchup } & 100,000 & \$ 3.00 \text { per case } & \$ 28 \text { per case } \\\text { Juice } & 150,000 & 5.00 \text { per case } & \$ 25 \text { per case } \\\text { Canned } & 200,000 & 2.50 \text { per case } & 10 \text { per case }\end{array}$

Required:
a. Determine the amount allocated to each product if the estimated net realizable value method is used.
b. Determine the amount allocated to each product if the physical quantities method is used.

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Definitions:

Optimize

The act of making something as effective, perfect, or useful as possible, often involving the allocation of resources in the most efficient way.

Satisfice

Satisfice is a decision-making strategy that involves choosing an option that meets the minimum requirements necessary for satisfaction, rather than optimizing for the best possible outcome.

Escalation of Commitment

A phenomenon where people increase their investment in a decision despite new evidence suggesting it may be wrong, often due to cognitive biases or emotional attachment.

Poor Choices

Decisions made that lead to suboptimal or negative outcomes, often due to a lack of information or foresight.