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Savory produces two types of microwavable products: beef-flavored ramen and shrimp-flavored ramen. The two products share common inputs such as noodle and spices. The production of ramen results in a waste product referred to as stock, which dumps at negligible costs in a local drainage area. In June 2014
the following data were reported for the production and sales of beef-flavored and shrimp-flavored ramen:
Due to the popularity of its microwavable products, Savory decides to add a new line of products that targets dieters. These new products are produced by adding a special ingredient to dilute the original ramen and are to be sold under the names Special B and Special S, respectively. Following are the monthly data for all the products:
Joint Costs Joint costs(costs of noodles, spices, and other inputs and processing to splitoff point) s 230,000 Beef Shrimp Ramen Ramen Beginning inventory (tons) Production (tons) Sales (tons) Selling price per ton 0 13,000 16,000 13,000 16,000 $45 $ 60
Expert Answer
2.
Calculation of Joint cost allocation amont all three product as per suggession given by Summer Donahue
Savory should sell the stock because total gross margin will increase by $500
