Benjamin and Lenny Are Partners in the Double-B Farm, Where

question 102

Essay

Benjamin and Lenny are partners in the Double-B Farm, where they grow corn. They process the corn into four separate products. Double-B Farm's joint costs typically total $8,000. Additional data for the products are summarized in the table below:
Quantity Sales Price Separable
Produced Per Unit Costs
Corn oil 10,000 litres $1.50 per litre $3,000
Whole kernel corn 15,000 bushels $0.75 per bushel $2,250
Corn husks 6,000 husks $0.25 per husk -0-
Corn silk 12,000 kilograms $0.50 per kilogram $600
a)Classify each of Double-B's products as either a main product or a by-product, and justify your classifications.
b)Describe in your own words two methods for allocating Double-B's joint costs to its main products. List one pro and one con for each method. Which would you recommend to Benjamin and Lenny? Why?
c)Describe in your own words two methods of accounting for by-products. Which method is generally considered better? Explain.
d)Benjamin and Lenny are considering whether to allocate joint costs to the main products using the physical output method. Can this method be used to allocate joint costs given the data in the table above? Explain.

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Definitions:

Lawrence Kohlberg

An American psychologist best known for his theory of stages of moral development.

Postconventional Moral

A level of moral reasoning that is based on abstract reasoning and principles, beyond societal norms or laws.

Segregation

The act or state of separating or setting apart from others or from the main body or group.

Pregnant

The state of carrying a developing fetus within the uterus.