Biondi Industries is a manufacturer of chemicals for various purposes. One of the processes used by Biondi produces HTP–3, a chemical used in hot tubs and swimming pools: PST–4, a chemical used in pesticides: and RJ–5 a product that is sold to fertilizer manufacturers. Biondi uses the net-realizable value method to allocate join production costs. The ratio of output quantities, to input qualities of direct material used in the joint process remain, consistent: from month to month. Biondi industries uses FIFO (first–in, first–out) in valuing its finished-goods inventories.
Data regarding Biondi’s operations for the month of October are as follows, During this month. Biondi incurred joint production costs of $1,700,000 in the manufacture of HTP–3. PST–4.and RJ –5.
| HTP–3 | PST–4 | RJ–5 |
Finished goods inventory in gallons October | 18,000 | 52,000 | 3,000 |
October sales in gallons | 650,000 | 325,000 | 150,000 |
October or production gallons | 700,000 | 350,000 | 170,000 |
Additional processing costs | $874,000 | $816,000 | $60,000 |
Final sales value per gallon | $4.00 | $6.00 | $5.00 |
Required:
l. Determine Biondi Industries’ allocation of joint production costs for the month of October. (Carry calculation of relative proportions to four decimal places.).
2. Determine the dollar values of the finished-goods inventories for HTP–3. PST–4 and RJ–5 as of October 31 (Round the cost per gallon to the nearest cent.)
3. Suppose Biondi Industries has a new opportunity to sell PST–4 at the split-off point for $3.80 per gallon. Prepare an analysis showing whether the company should sell PST-4 at the split-off point or continue to process this product further.
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