Alderon â. Joint Products and Byproducts. Alderon Industries is a manufacturer of chemicals for various purposes. One
Alderon – Joint Products and Byproducts Alderon Industries is a manufacturer of chemicals for various purposes. One of the processes used by Alderon produces SPL-3, a chemical used in swimming pool; PST-4, a chemical used in pesticides; and RJ-5, a byproduct that is sold to fertilizer manufacturers. Alderon uses the net realizable value of its main products to allocate joint production costs and the FIFO inventory method to value the main products. The byproduct is inventoried at its net realizable value, and this net realizable value is used to reduce the joint production costs before the joint costs are allocated to the main products. The ratio of output quantities to input quantities of direct materials used in the joint process remains consistent from month to month. Data regarding Alderon’s operations for the month of November are presented below. During this month, Alderon incurred joint production costs of $1,702,000 in the manufacture of SPL-3, PST-4 and RJ-5. SPL-3
PST-4
RJ-5
18,000
52,000
3,000
November sales in gallons
650,000
325,000
150,000
November production in gallons
700,000
350,000
170,000
none
$3.80
$0.70*
Additional processing costs
$874,000
$816,000
none
Final sales value per gallon
$4.00
$6.00
none
Finished goods inventory in gallons (Nov 1)
Sales value per gallon at split-off
* Disposal costs of $.10 per gallon will be incurred in order to sell the byproduct. Required: A. Determine Alderon Industries’ allocation of joint production costs for November. Be sure to present supporting calculations. B. Determine the dollar values of the finished goods inventories for SPL-3, PST-4 and RJ-5 as of November 30. C. Alderon Industries has an opportunity to sell PST-4 at the split-off point for $3.80 per gallon. Prepare an analysis showing whether Alderon should sell PST-4 at the split-off point or continue to process this product further.
