Red Sauce Canning Company Processes Tomatoes into Catsup,tomato Juice,and Canned

question 43

Essay

Red Sauce Canning Company processes tomatoes into catsup,tomato juice,and canned tomatoes.During the summer of 20X5,the joint costs of processing the tomatoes were $420,000.There was no beginning or ending inventories for the summer.Production and sales value information for the summer is as follows:
$$\begin{array} { | l | r | r | r | r | } \hline { \text { Product } } & { \text { Cases } } & \begin{array} { r } \text { Sales Value at } \\\text { Splitoff Point }\end{array} & \text { Separable Costs } & \text { Selling Price } \\\hline \text { Catsup } & 100,000 & \$ 6 \text { per case } & \$ 3.00 \text { per case } & \$ 28 \text { per case } \\\hline \text { Tuice } & 150,000 & 8 \text { per case } & 5.00 \text { per case } & 25 \text { per case } \\\hline \text { Canned } & 200,000 & 5 \text { per case } & 2.50 \text { per case } & 10 \text { per case } \\\hline\end{array}$$ Required:
Determine the amount allocated to each product if the estimated net realizable value method is used,and compute the cost per case for each product.

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Definitions:

Total Revenue

The total amount of money received by a firm from sales of its products or services before any expenses are subtracted.

Average Product

The output per unit of input, for example, the average quantity of product produced per worker or per machine.

Marginal Product

The additional output that results from using one more unit of a variable input, holding all other inputs constant.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot increase proportionally.