ED Products Corp. buys one input, full-cream milk, and refines it. From each gallon of milk, ED Produce three cups of butter and nine cups of buttermilk. During May 2011 the corporation bought 12,000 gallons of milk for $22,250, spent another $9,430 on the process to separate the milk into butter and buttermilk. Butter could be sold for $2,20 per pound and buttermilk could be sold immediately for $1.20 per quart (note two cups = one pound, four cups = one quart)
ED Products Corp. chooses to process the butter further into spreadable butter by mixing it with canola oil, incurring an additional cost of $1.60 per pound. This process results in two tubs of spreadable butter for each pound of butter processed. Each tub of spreadable butter sells for $2.30.
Requirement
1. Allocate the joint costs using the following methods
a. Sales value at split off
b. Approximated Net realizable value at split off