Handout+-+Chapter+17+-+Nov+13th copy
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Dec 6, 2023
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Chapter 17 Handout -Solutions
November 13
th
, 2023
Problem 1.
Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point
where two products (paper and pencil casings) are obtained. The products are then sold to an
independent company that markets and distributes them to retail outlets. The following information was
collected for the month of October:
Trees processed
:
310 trees
Production
:
paper
180,000 sheets
pencil casings
180,000
Sales
:
paper
170,000 at $0.20 per page
pencil casings
177,500 at $0.24 per casing
The cost of purchasing 310 trees and processing them up to the split-off point to yield 180,000 sheets of
paper and 180,000 pencil casings is $12,500.
Bismite's accounting department reported no beginning inventory.
What is the total sales value at the split-off point for paper?
180,000 x .20= 36,000
Total sales paper = 36,000
Problem 2.
Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point
where two products (paper and pencil casings) emerge from the process. The products are then sold to an
independent company that markets and distributes them to retail outlets. The following information was
collected for the month of October:
Trees processed
:
270 trees
Production
:
paper
180,000 sheets
pencil casings
180,000
Sales
:
paper
166,000 at $0.20 per page
pencil casings
176,000 at $0.23 per casing
The cost of purchasing 270 trees and processing them up to the split-off point to yield 180,000 sheets of
paper and 180,000 pencil casings is $15,000. Bismite's accounting department reported no beginning
inventory. What are the paper's and the pencil's approximate weighted cost proportions using the sales
value at split-off method, respectively?
180,000 x .20=36,000
180,000 x .23=41,400
Total sales value= 77,400
Paper- 36,000/77,400= .
465
Pencil- 41,400/77,400
=.534
Problem 3
Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point
where two products (paper and pencil casings) emerge from the process. The products are then sold to an
independent company that markets and distributes them to retail outlets. The following information was
collected for the month of October:
Trees processed
:
330 trees
Production
:
paper
190,000 sheets
pencil casings
190,000
Sales
:
paper
184,000 at $0.10 per page
pencil casings
186,500 at $0.14 per casing
The cost of purchasing 330 trees and processing them up to the split-off point to yield 190,000 sheets of
paper and 190,000 pencil casings is $15,500.
Bismite's accounting department reported no beginning inventory.
If the sales value at split-off method is used, what is the approximate production cost for each pencil
casing?
Step 1:
To find the production cost for a product in the sales mix:
[(Product Sales/ Total Revenue)] x Split off cost
Products sales = 190,000x.10=19,000
190,000 .14=26,600
Total= 45,600
(26,600/45,600) x 15,500 = 9,041.67
Step 2:
Once you find the above, to the get the per unit amount, formula:
Production cost of product/number of units produced
9,041.67 / 190,000=
.05 – answer
Problem 4.
The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint process. June
production is 10,000 widgets; 13,500 gizmos; and 15,000 turnbols. Respective per unit selling prices at
split-off are $95, $60, and $20. Joint costs up to the split-off point are $187,500.
What amount of joint costs
will be allocated to the Turnbols? (Do not round any intermediary calculations.)
W-10,000 x 95= 950,000
G-13,500 x 60= 810,000
T- 15,000 x 20= 300,000
Total= 2,060,000
Turnbols = 300,000/2,060,000= .14563107
187,500 x .14563107=
27,305.83
Problem 5.
The Green Company processes unprocessed goat milk up to the split-off point where two products,
condensed goat milk and skim goat milk result. The following information was collected for the month of
October:
Direct Materials processed
:
100,500 gallons (after shrinkage)
Production
:
Condensed goat milk
42,500 gallons
Skim goat milk
58,000 gallons
Sales
:
Condensed goat milk
$4.00 per gallon
Skim goat milk
$3.50 per gallon
The costs of purchasing the unprocessed goat milk and processing it up to the split-off point to yield a
total of 100,500 gallons of saleable product was $191,480. There were no inventory balances of either
product.
Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is
shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $6 per usable gallon.
Xyla can be sold for $21 per gallon.
Skim goat milk can be processed further to yield 56,700 gallons of skim goat ice cream, for an additional
processing cost per usable gallon of $6. The product can be sold for $14 per gallon.
There are no beginning and ending inventory balances.
What is the estimated net realizable value of Xyla at the split-off point?
Xyla Sales =
42,000 x 21 = 882,000
Separable cost = 42,000 x 6 = 252,000
882,000 – 252,000=
630,000- NRV answer
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