Corporation manufactures three products from a joint process. The three products are in industrial grade form at the split off point. They can either be sold at that point or processed further into premium grade. Costs related to each batch of this process is as follows: Product 1 Product 2 Product 3 Sales Price at split-off point $16 $12 $5 Allocated joint costs $6,000 $6,000 $6,000 Sales Price after further processing $20 $18 $14 Cost of further processing $6,360 $1,420 $2,650 Product Quantity 1,000 lb. 1,000 lb. 1,000 Ib. Q. What would be the additional amount of profit that Corp. would gain from further processing the product(s) that is/are more profitable to process further rather than be sold at the split-off point?

Corporation manufactures three products from a joint process. The three products are in industrial grade form at the split off point. They can either be sold at that point or processed further into premium grade. Costs related to each batch of this process is as follows: Product 1 Product 2 Product 3 Sales Price at split-off point $16 $12 $5 Allocated joint costs $6,000 $6,000 $6,000 Sales Price after further processing $20 $18 $14 Cost of further processing $6,360 $1,420 $2,650 Product Quantity 1,000 lb. 1,000 lb. 1,000 Ib. Q. What would be the additional amount of profit that Corp. would gain from further processing the product(s) that is/are more profitable to process further rather than be sold at the split-off point?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 10CE: A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each...

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Tucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000-gallon drums for 2.000. Processing costs are 3,000 to process the 1,000 gallons of Duointo 800 gallons of Big and 200 gallons of Mini. The selling price is 9 per gallon for Big and4 per gallon for Mini. If the physical units method is used to allocate joint costs to the finalproducts, the total cost allocated to produce Mini is: a. 500. b. 4,000. c. 1,000. d. 4,500.
Pacheco, Inc., produces two products, overs and unders, in a single process. The joint costs of this process were 50,000, and 14,000 units of overs and 36,000 units of unders were produced. Separable processing costs beyond the split-off point were as follows: overs, 18,000; unders, 23,040. Overs sell for 2.00 per unit; unders sell for 3.14 per unit. Required: 1. Allocate the 50,000 joint costs using the estimated net realizable value method. 2. Suppose that overs could be sold at the split-off point for 1.80 per unit. Should Pacheco sell overs at split-off or process them further? Show supporting computations.
Oakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of Beracyl in a joint production process, incurring 250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced. Mononate and Beracyl can each be sold at the split-off point in a semifinished state or, alternatively, processed further. Additional data about the two products are as follows: An assistant in the companys cost accounting department was overheard saying ...that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is simply not worth the effort. Which of the following strategies should be recommended for Oakes?
A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each production run costs 12,900. None of the products can be sold at split-off, but must be processed further. Information on one batch of the three products is as follows: Required: 1. Allocate the joint cost to L-Ten, Triol, and Pioze using the net realizable value method. (Round the percentages to four significant digits. Round all cost allocations to the nearest dollar.) 2. What if it cost 2 to process each gallon of Triol beyond the split-off point? How would that affect the allocation of joint cost to the three products?
Man OFort Inc. produces two different styles of door handles, standard and curved. The door handles go through a joint production molding process costing 29,000 per batch and producing 2,000 standard door handles and 1,000 curved door handles at the split-off point. Both door handles undergo additional production processes after the split-off point, but could be sold at that point: the standard style for 4 per door handle and the curved style for 2 per door handle. Determine the amount of joint production costs allocated to each style of door handle using the market value at split-off method.
Venezuela Oil Inc. transports crude oil to its refinery where it is processed into main products gasoline, kerosene, and diesel fuel, and by-product base oil. The base oil is sold at the split-off point for $1,000,000 of annual revenue, and the joint processing costs to get the crude oil to split-off are $10,000,000. Additional information includes: Required: Determine the allocation of joint costs using the net realizable value method, rounding the sales value percentages to the nearest tenth of a percent. (Hint: Reduce the amount of the joint costs to be allocated by the amount of the by-product revenue.)
LeMoyne Manufacturing Inc.’s joint cost of producing 2,000 units of Product X, 1,000 units of Product Y, and 1,000 units of Product Z is $50,000. The unit sales values of the three products at the split-off point are Product X–$30, Product Y–$100, and Product Z–$90. Ending inventories include 200 units of Product X, 300 units of Product Y, and 100 units of Product Z. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their sales values at split-off. Assume that Product Z can be sold for $120 a unit if it is processed after split-off at a cost of $10 a unit. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their net realizable values.
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Joint cost allocation Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of 250 per batch. At the split-off point, one batchproduces 80, 40, and 25 bottles of hand, body, and foot lotion, respectively. After the split-off point,hand lotion is sold immediately for 2.50 per bottle. Body lotion is processed further at an additional cost of 0.25 per bottle and then sold for 5.75 per bottle. Foot lotion is processed further atan additional cost of 0.85 per bottle and then sold for 4.00 per bottle. Assume that body and footlotion could be sold at the split-off point for 3.00 and 3.20 per bottle, respectively. Instructions 1. Using the market value at split-off method, allocate the joint costs of production to each product. 2. Based on the information provided and your answer to part (1), should Lovely LotionInc. continue processing body and foot lotion after the split-off point? 3. Allocate the joint costs of production to each product using the net realizable value method.
Corporation manufactures three products from a joint process. The three products are in industrial grade form at the split- off point. They can either be sold at that point or processed further into premium grade. Costs related to each batch of this process is as follows: Sales Price at split-off point Allocated joint costs Sales Price after further processing Cost of further processing Product Quantity Product 1 $16 $6,000 $20 $5,330 1,000 lb. Product 2 $12 $6,000 $18 $2,050 1,000 lb. Product 3 $5 $6,000 $14 $2,530 1,000 lb. Q: What would be the additional amount of profit that more profitable to process further rather than be sold at the split-off point? A: $ Corp, would gain from further processing the product(s) that is/are
SAMCIS Company produces three products (X, Y, and Z) in a joint process costing P100,000. The products can be sold as they leave the process, or they can be processed further and sold. The cost accountant has provided you with the following information: Separable Further Processing Costs P60,000 50,000 90,000 Sales Price at Split-Off Sales Price After Product Unit Volume Further Processing 3,000 4,000 8,000 Assume that all processing costs are variable costs. X Y P25 30 P10 15 20 35 Required: Which products should SAMCIS sell at split-off, and which products should be processed further?
SAMCIS Company produces three products (X, Y, and Z) in a joint process costing P100,000. The products can be sold as they leave the process, or they can be processed further and sold. The cost accountant has provided you with the following information: IIT Separable Further Processing Costs Sales Price Sales Price After Product Unit Volume at Split-Off Further Processing 3,000 4,000 8,000 P10 15 P60,000 50,000 90,000 P25 Y 30 20 35 Assume that all processing costs are variable costs. Required:/ Which products should SAMCIS sell at split-off, and which products should be processed further?