Chapter 17, Problem 29P

Biondi Industries is a manufacturer of chemicals for various purposes. One of the processes used by Biondi produces HTP–3, a chemical used in hot tubs and swimming pools; PST–4, a chemical used in pesticides; and RJ–5, a product that is sold to fertilizer manufacturers. Biondi uses the net-realizable-value method to allocate joint production costs. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Biondi Industries uses FIFO (first-in, first-out) in valuing its finished-goods inventories.

Data regarding Biondi’s operations for the month of October are as follows. During this month, Biondi incurred joint production costs of $1,700,000 in the manufacture of HTP–3, PST–4, and RJ–5.

Required:

1. 1. Determine Biondi Industries’ allocation of joint production costs for the month of October. (Carry calculation of relative proportions to four decimal places.)
2. 2. Determine the dollar values of the finished-goods inventories for HTP–3, PST–4, and RJ–5 as of October 31. (Round the cost per gallon to the nearest cent.)
3. 3. Suppose Biondi Industries has a new opportunity to sell PST–4 at the split-off point for $3.80 per gallon. Prepare an analysis showing whether the company should sell PST–4 at the split-off point or continue to process this product further.