Problem: Allsap Apple Company buys apples from local orchards and presses them to produce apple juice. The pulp that remains after pressing is sold to farmers as livestock food. This livestock food is accounted for as a by-product. During the 20X7 fiscal year, the company paid $800,000 to purchase 8 million pounds of apples. After processing, 1 million pounds of pulp remained. Allsap spent $30,000 to package and ship the pulp, which was sold for $50,000.
1. How much of the joint cost of the apples is allocated to the pulp?
2. Compute the total inventory cost (and therefore the cost of goods sold) for the pulp.
3. Assume that $130,000 was spent to press the apples and $150,000 was spent to filter, pasteurize, and pack the apple juice. Compute the total inventory cost of the apple juice produced.