Innerva Soy Products (ISP) buys soybeans and processes them into other soy products. Each ton of soybeans that MMSP purchases for $380 can be converted for an additional $210 into 575 lbs of soy meal and 180 gallons of soy oil. A pound of soy meal can be sold at split-off for $1.24 and soy oil can be sold in bulk for $4.5 per gallon.
Each pound of soy cookies can be sold for $2.24 per pound. The 160 gallons of soy oil can be packaged at a cost of $240 and made into 640 quarts of Soy oil. Each quart of Soy oil can be sold for $1.35.
Allocate the joint cost to the cookies and the Soy oil using the following:
(a) Sales value at split-off method.
(b) NRV method.
Should ISP have processed each of the products further? What effect does the allocation method have on this decision?