Joint production decisions Grassy Fertilizer manufactures two lines of garden grade fertilizer as part of a joint production process: GF10 and GF20

Joint costs up to the split-off point total $85,000 per batch. These joint costs are allocated to GF10 and GF20 in proportion to their relative sales values at the split-off point of $40,000 and $60,000, respectively.

Both lines of garden grade fertilizer can be further processed into commercial grade fertilizer. The following table summarizes the costs and revenue associated with additional processing of GF10 and GF20:

(a) The $85,000 in joint costs should be allocated to each product as follows:
GF10 $____________, GF20 $____________
(b) Which product (GF10 or GF20) would result in a net decrease in operating income if processed into a commercial grade fertilizer?
____________
(c) Which product (GF10 or GF20) would result in a net increase in operating income if processed into a commercial grade fertilizer?
____________

What will be an ideal response?

(a) GF10 = $34,000 GF20 = $51,000
(b) GF20
(c) GF10

Feedback: (a)

(b)