Question:
(Monetary measure joint cost allocation) Illinois Soybeans operates a processing plant in which soybeans are crushed to create soybean oil and soybean meal. The company purchases soybeans by the bushel (60 pounds). From each bushel, the normal yield is 11 pounds of soybean oil, 44 pounds of soybean meal, and 5 pounds of waste. For March, Illinois Soybeans purchased and processed 5,000,000 bushels of soybeans. The yield in March on the soybeans was equal to the normal yield. The following costs were incurred for the month:
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Soybeans
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$47,500,000
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Conversion costs
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2,300,000
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At the end of March there was no in-process or raw material in inventory. Also, there was no beginning Finished Goods Inventory. For the month, 60 percent of the soybean oil and 75 percent of the soybean meal was sold.
a. Assume the net realizable values of the joint products are as follows:
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Soybean oil
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$0.50 per pound
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Soybean meal
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$0.20 per pound
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Allocate the joint cost incurred in March on the basis of net realizable value.
b. Calculate the cost of goods sold for March using the answer to (a).
c. Calculate the cost of Finished Goods Inventory at the end of March based on the answer to (a)