Question: Clark Kent, Inc., buys crypton for $0.
Clark Kent, Inc., buys crypton for $0.80 a gallon. At the end of processing in Dept. 1, crypton splits off into products A, B, and C. Product A is sold at the split-off point with no further processing. Products B and C require further processing before they can be sold. Product B is processed in Dept. 2, and Product C is processed in Dept. 3. Following is a summary of costs and other related data for the year ended December 31: 
No inventories were on hand at the beginning of the year, and no crypton was on hand at the end of the year. All gallons on hand at the end of the year were complete as to processing. Kent uses the relative sales value method of allocating joint costs. Required: 1. Calculate the allocation of joint costs. 2. Calculate the total cost per unit for each product. 3. In examining the product cost reports, Lois Lane, Vice President—Marketing, notes that the per-unit cost of Product B is greater than the selling price of $3.20 that can be received in the competitive marketplace. Lane wonders if they should stop selling Product B. How did Lane determine that the product was being sold at a loss? What per unit cost should be used in determining whether Product B should be sold?
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Dept. 1 $ 76,000 Dept. 2 Dept. 3 Cost of crypton ... 14,000 $ 65,000 Direct labor $51,000 Factory overhead 10,000 26,500 49,000 Total $100,000 $77,500 $114,000 Product A Product B Product C Gallons sold ... 20,000 30,000 45,000 Gallons on hand at December 31 10,000 15,000 Sales in dollars $30,000 $96,000 $141,750
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