Riverside Company Manufactures G and H in a Joint Process

question 3

Essay

Riverside Company manufactures G and H in a joint process. The joint costs amount to $80,000 per batch of finished goods. Each batch yields 20,000 litres, of which 40% are G and 60% are H. The selling price of G is $8.75 per litre, and the selling price of H is $15.00 per litre.
Required:
A. If the joint costs are allocated on the basis of the products' sales value at the split-off point, what amount of joint cost will be charged to each product?
B. Riverside has discovered a new process by which G can be refined into Product GG, which has a sales price of $12 per litre. This additional processing would increase costs by $2.10 per litre. Assuming there are no other changes in costs, should the company use the new process? Show calculations.

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Definitions:

Parol Evidence

A legal rule that prevents parties to a written contract from presenting extrinsic evidence of terms of the agreement that contradict, modify, or vary the written terms.

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A set of rules or principles designed to regulate conduct or provide guidelines for behavior.

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A signature, usually on the back of a check or other negotiable instrument, that transfers the rights of the document to another party or specifies conditions for its use.

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The governing body of the Federal Reserve System, responsible for the United States' monetary policy.