Question

Jones Company purchases potatoes from farm distributors at a price of $93.00, after which the potatoes are peeled, at a cost of $15, resulting in two intermediate products: Potato peels that can be sold as food for pigs for $35. Peeled potatoes that can be sold as food for human consumption for $45. Instead of selling the potato peels as food for pigs, Jones can spend an additional $15 to turn the peels into organic nutrients that can be sold for $43. Instead of selling the peeled potatoes as is, Jones can spend an additional $24 to turn the potatoes into French fries and sell them for $80. . Required Assume Jones buys 100 batches of potatoes, based on the information above, what is the dollar amount of joint costs related to processing the 100 batches of potatoes? а. What is the financial advantage (disadvantage) of processing the potato peels into organic nutrients (rather than selling them as food for pigs)? b. What is the financial advantage (disadvantage) of processing the peeled potatoes into french fries (rather than selling them as plain peeled potatoes)? C. Assuming Jones processes the potatoes so as to recognize all financial advantages, what is Jones net income for the 100 batches? d.

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Answer 1

Page 1 Date: Page No.: a. = $93 Purchar ast of Total cost Price of peeling potatoes = $15 of peeling & 108 cost of 100 batches of potatoes = $108x10o. - $10800 - Potahseels into organic norients $43 Selling selling as Price price food of of for organic nutrients potato peels. pige $ 35 Additional morgin les: cost further prouning cost. Advantage / Caisadvantage of proussing $ 15

Page @ Date: Page No c. Pelled potakes into french fries selling price of French frico a selling pris of peeled potatoes Add hona margin uss cost of furthur prours. Advantage of prowning $80 $ 45 $35 &zu $ 11 selling price of 8000 French fries ( 8ex100) potato peels (35x100) selling priu of 3500 (2400) les: cost into of further french fries prous (214x100) les : us: cost cost of potatoes (93x100) peeling (rx100) (9300) (1500) of Net Income Clos (1700)