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Problem 2 Carichem Company produces sanitation products after processing specialized chemicals. The following relates to its activities: ⚫ 1 Kilogram of chemicals purchased for $4000 and with an additional $2000 is processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a gram of Crystal can be sold for $2 and the Cleaning agent can be sold for $8 per litre. ⚫ At an additional cost of $800, Carichem can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $4 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $600 and made into 200 packs of Softener that can be sold for $4 per pack. Required: 1. Allocate the joint cost to the Detergent and the Softener using the following: a. Sales value at split-off method b. NRV method 2. Should Carichem have processed each of the products further? What effect does the allocation method have on this decision? Cariman Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Human Resources and Information Services). For the last quarter of 2020, Cariman's cost records indicate the following: Budgeted overhead costs before any inter- department cost allocations Support work supplied by HR SUPPORT PRODUCTION Information Machining Assembly Total Services Human Resources (HR) (IS) $400,000 $2,000,000 $10,912,000 $14,916,000 $28,228,000 0 25% 40% 35% 100% (Number of employees) Support work 10% 0 30% 60% 100% supplied by IS (Processing costs)

Problem 2 Carichem Company produces sanitation products after processing specialized chemicals. The following relates to its activities: ⚫ 1 Kilogram of chemicals purchased for $4000 and with an additional $2000 is processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a gram of Crystal can be sold for $2 and the Cleaning agent can be sold for $8 per litre. ⚫ At an additional cost of $800, Carichem can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $4 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $600 and made into 200 packs of Softener that can be sold for $4 per pack. Required: 1. Allocate the joint cost to the Detergent and the Softener using the following: a. Sales value at split-off method b. NRV method 2. Should Carichem have processed each of the products further? What effect does the allocation method have on this decision? Cariman Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Human Resources and Information Services). For the last quarter of 2020, Cariman's cost records indicate the following: Budgeted overhead costs before any inter- department cost allocations Support work supplied by HR SUPPORT PRODUCTION Information Machining Assembly Total Services Human Resources (HR) (IS) $400,000 $2,000,000 $10,912,000 $14,916,000 $28,228,000 0 25% 40% 35% 100% (Number of employees) Support work 10% 0 30% 60% 100% supplied by IS (Processing costs)

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter4: Job Order Costing
Section: Chapter Questions
Problem 7EA: A company estimates its manufacturing overhead will be $750,000 for the next year. What is the...
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Question 1

 Allocate the two support departments’ costs to the two operating departments using the 
following methods: 
a. Direct method 
b. Step-down method (allocate HR first) 
c. Step-down method (allocate IS first) 
d. The Algebraic method. 
2. Compare and explain differences in the support-department costs allocated to each 
production department. 
3. What approaches might be used to decide the sequence in which to allocate support 
departments when using the step-down method?

Problem 2 Carichem Company produces sanitation products after processing specialized chemicals. The following relates to its activities: ⚫ 1 Kilogram of chemicals purchased for $4000 and with an additional $2000 is processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a gram of Crystal can be sold for $2 and the Cleaning agent can be sold for $8 per litre. ⚫ At an additional cost of $800, Carichem can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $4 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $600 and made into 200 packs of Softener that can be sold for $4 per pack. Required: 1. Allocate the joint cost to the Detergent and the Softener using the following: a. Sales value at split-off method b. NRV method 2. Should Carichem have processed each of the products further? What effect does the allocation method have on this decision?
Transcribed Image Text:Problem 2 Carichem Company produces sanitation products after processing specialized chemicals. The following relates to its activities: ⚫ 1 Kilogram of chemicals purchased for $4000 and with an additional $2000 is processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a gram of Crystal can be sold for $2 and the Cleaning agent can be sold for $8 per litre. ⚫ At an additional cost of $800, Carichem can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $4 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $600 and made into 200 packs of Softener that can be sold for $4 per pack. Required: 1. Allocate the joint cost to the Detergent and the Softener using the following: a. Sales value at split-off method b. NRV method 2. Should Carichem have processed each of the products further? What effect does the allocation method have on this decision?
Cariman Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Human Resources and Information Services). For the last quarter of 2020, Cariman's cost records indicate the following: Budgeted overhead costs before any inter- department cost allocations Support work supplied by HR SUPPORT PRODUCTION Information Machining Assembly Total Services Human Resources (HR) (IS) $400,000 $2,000,000 $10,912,000 $14,916,000 $28,228,000 0 25% 40% 35% 100% (Number of employees) Support work 10% 0 30% 60% 100% supplied by IS (Processing costs)
Transcribed Image Text:Cariman Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Human Resources and Information Services). For the last quarter of 2020, Cariman's cost records indicate the following: Budgeted overhead costs before any inter- department cost allocations Support work supplied by HR SUPPORT PRODUCTION Information Machining Assembly Total Services Human Resources (HR) (IS) $400,000 $2,000,000 $10,912,000 $14,916,000 $28,228,000 0 25% 40% 35% 100% (Number of employees) Support work 10% 0 30% 60% 100% supplied by IS (Processing costs)
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