Grapevine Corporation produces two joint products, JP-1 and JP-2, and a single by-product, BP-1, in Department 2 of its manufacturing plant. JP-1 is subsequently transferred to Department 3, where it is refined into a more expensive, higher-priced product, JP-1R, and a by-product known as BP-2. Recently, Santa Fe Company introduced a product that would compete directly with JP-1R, and as a result, Grapevine must re-evaluate its decision to
process JP-1 further. The market for JP-1 will not be affected by Santa Fe’s product and Grapevine plans to continue production of JP-1, even if further processing is terminated. Should this latter action be necessary, Department 3 will be dismantled. Which of the following items should Grapevine consider in its decision to continue or terminate Department 3 operations?
1. The selling price per pound of JP-1
2. The total hourly direct labor cost in Department3
3. Unit marketing and packaging costs for BP-2
4. Supervisory salaries of Department 3 personnel who will be transferred elsewhere in the plant, if processing is terminated.
5. Department 2 joint cost allocated to JP-1 and transferred to Department 3.
6. The cost of existing JP-1R inventory.