Soy Products (Upper KSP) buys soybeans and processes them into other soy products. Each ton of soybeans that Upper KSP purchases for $ 380 can be converted for an additional $ 170 into 525 lbs of soy meal and 120 gallons of soy oil. A pound of soy meal can be sold at splitoff for $ 1.36 and soy oil can be sold in bulk for $ 4.25 per gallon. Upper KSP can process the 525 pounds of soy meal into 575 pounds of soy cookies at an additional cost of $ 380. Each pound of soy cookies can be sold for $ 2.36 per pound. The 120 gallons of soy oil can be packaged at a cost of $ 260 and made into 480 quarts of Soyola. Each quart of Soyola can be sold for $ 1.55. Read the requirementsAllocate the joint cost to the cookies and the Soyola using the following:a. Sales value at splitoff methodb. NRV methodc. Should ISP have processed each of the products further? What effect does the allocation method have on this decision?

ISP should process the soy meal into soy cookies because that increases profit by $263. However, ISP should sell the soy oil as is, without processing it into the form of Soyola, because profit will be $56 higher if they do. Since the total joint cost is the same under both allocation methods, it is not a relevant cost to the decision to sell at splitoff or process further.

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