16-27 Alternative methods of joint-cost allocation, product-mix decisions. The Southern Oil Companybuys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product Cis fully processed by the splitoff point. Products A, B, and D can individually be further refined into Super A,Super B, and Super D. In the most recent month (December), the output at the splitoff point was as follows:■ Product A, 322,400 gallonsProduct B, 119,600 gallonsProduct C, 52,000 gallonsProduct D, 26,000 gallonsThe joint costs of purchasing and processing the crude vegetable oil were $96,000. Southern had no begin-ning or ending inventories. Sales of product C in December were $24,000. Products A, B, and D were furtherrefined and then sold. Data related to December are as follows:Super ASuper BSuper DSeparable Processing Costs to Make Super Products$249,600Product A, $84,000■ Product B, $72,000Product D, $60,000102,400152,000Revenues$300,000160,000160,000Southern had the option of selling products A, B, and D at the splitoff point. This alternative would haveyielded the following revenues for the December production:1. Compute the gross-margin percentage for each product sold in December, using the following meth-ods for allocating the $96,000 joint costs:a. Sales value at splitoffb. Physical-measurec. NRV2. Could Southern have increased its December operating income by making different decisions aboutthe further processing of products A, B, or D? Show the effect on operating income of any changesyou recommend.Required

Joint cost Allocation : > Joint products represents two or more products separated in the course…

1. Compute the gross-margin percentage for each product sold in December, using the following meth- ods for allocating the $96,000 joint costs: a. Sales value at splitoff b. Physical-measure c. NRV 2. Could Southern have increased its December operating income by making different decisions about the further processing of products A, B, or D? Show the effect on operating income of any changes you recommend.

1. Compute the gross-margin percentage for each product sold in December, using the following meth- ods for allocating the $96,000 joint costs: a. Sales value at splitoff b. Physical-measure c. NRV 2. Could Southern have increased its December operating income by making different decisions about the further processing of products A, B, or D? Show the effect on operating income of any changes you recommend.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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