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Case I. Hydrophonics Inc., is a chemical manufacturing company which produces two main products: ZXC-102 and DFG-104. It also has a by-product called QWE-106. It has been the company's policy to subtract whatever the profit derived from the sale of the said by-product. The company has lack of facility to process further this by-product into a main product. Hence, QWE-106's net revenue is used to reduce the joint production costs before these joint production costs are allocated to main products. Robolem Qebmob, the company's Chief Financial Officer, wants to implement the sales value method of joint cost allocation. He believes that inventoriable cost should be based on each product's ability to contribute to the recovery of joint production cost. The sales value of the by-product would be treated in the manner it is treated under the quantitative method. In relation to the previous statement above, the company currently uses the quantitative method of allocating joint costs to main products. The FIFO inventory method is used to cost the main products. Data describing operations during August are as follows: Information ZXC-102 DFG-104 QWE-106 Finished goods, 20,000 40,000 10,000 August 1 August sales in 800,000 700,000 200,000 gallons August production in 900,000 720,000 240,000 gallons SV@SOP P4.00 Add'l processing P1,800,000 P3.00 P720,000 P1.10* cost after SOP Final sales value P10.00 P8.00 "Marketing cost of P0.10 per gallon will be incurred to sell the by-product. The joint production cost amounting to P5,280,000.00 for August 2023. Requirements: 1. Calculate the joint cost to be allocated to the main products using the sales value method 2. Calculate the joint cost to be allocated to the main products using the NRV method 3. Determine which of the two main products should the company process further.

Case I. Hydrophonics Inc., is a chemical manufacturing company which produces two main products: ZXC-102 and DFG-104. It also has a by-product called QWE-106. It has been the company's policy to subtract whatever the profit derived from the sale of the said by-product. The company has lack of facility to process further this by-product into a main product. Hence, QWE-106's net revenue is used to reduce the joint production costs before these joint production costs are allocated to main products. Robolem Qebmob, the company's Chief Financial Officer, wants to implement the sales value method of joint cost allocation. He believes that inventoriable cost should be based on each product's ability to contribute to the recovery of joint production cost. The sales value of the by-product would be treated in the manner it is treated under the quantitative method. In relation to the previous statement above, the company currently uses the quantitative method of allocating joint costs to main products. The FIFO inventory method is used to cost the main products. Data describing operations during August are as follows: Information ZXC-102 DFG-104 QWE-106 Finished goods, 20,000 40,000 10,000 August 1 August sales in 800,000 700,000 200,000 gallons August production in 900,000 720,000 240,000 gallons SV@SOP P4.00 Add'l processing P1,800,000 P3.00 P720,000 P1.10* cost after SOP Final sales value P10.00 P8.00 "Marketing cost of P0.10 per gallon will be incurred to sell the by-product. The joint production cost amounting to P5,280,000.00 for August 2023. Requirements: 1. Calculate the joint cost to be allocated to the main products using the sales value method 2. Calculate the joint cost to be allocated to the main products using the NRV method 3. Determine which of the two main products should the company process further.

FINANCIAL ACCOUNTING
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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Case I. Hydrophonics Inc., is a chemical manufacturing company which produces two main products: ZXC-102 and DFG-104. It also has a by-product called QWE-106. It has been the company's policy to subtract whatever the profit derived from the sale of the said by-product. The company has lack of facility to process further this by-product into a main product. Hence, QWE-106's net revenue is used to reduce the joint production costs before these joint production costs are allocated to main products. Robolem Qebmob, the company's Chief Financial Officer, wants to implement the sales value method of joint cost allocation. He believes that inventoriable cost should be based on each product's ability to contribute to the recovery of joint production cost. The sales value of the by-product would be treated in the manner it is treated under the quantitative method. In relation to the previous statement above, the company currently uses the quantitative method of allocating joint costs to main products. The FIFO inventory method is used to cost the main products. Data describing operations during August are as follows: Information ZXC-102 DFG-104 QWE-106 Finished goods, 20,000 40,000 10,000 August 1 August sales in 800,000 700,000 200,000 gallons August production in 900,000 720,000 240,000 gallons SV@SOP P4.00 Add'l processing P1,800,000 P3.00 P720,000 P1.10* cost after SOP Final sales value P10.00 P8.00 "Marketing cost of P0.10 per gallon will be incurred to sell the by-product. The joint production cost amounting to P5,280,000.00 for August 2023. Requirements: 1. Calculate the joint cost to be allocated to the main products using the sales value method 2. Calculate the joint cost to be allocated to the main products using the NRV method 3. Determine which of the two main products should the company process further.
Transcribed Image Text:Case I. Hydrophonics Inc., is a chemical manufacturing company which produces two main products: ZXC-102 and DFG-104. It also has a by-product called QWE-106. It has been the company's policy to subtract whatever the profit derived from the sale of the said by-product. The company has lack of facility to process further this by-product into a main product. Hence, QWE-106's net revenue is used to reduce the joint production costs before these joint production costs are allocated to main products. Robolem Qebmob, the company's Chief Financial Officer, wants to implement the sales value method of joint cost allocation. He believes that inventoriable cost should be based on each product's ability to contribute to the recovery of joint production cost. The sales value of the by-product would be treated in the manner it is treated under the quantitative method. In relation to the previous statement above, the company currently uses the quantitative method of allocating joint costs to main products. The FIFO inventory method is used to cost the main products. Data describing operations during August are as follows: Information ZXC-102 DFG-104 QWE-106 Finished goods, 20,000 40,000 10,000 August 1 August sales in 800,000 700,000 200,000 gallons August production in 900,000 720,000 240,000 gallons SV@SOP P4.00 Add'l processing P1,800,000 P3.00 P720,000 P1.10* cost after SOP Final sales value P10.00 P8.00 "Marketing cost of P0.10 per gallon will be incurred to sell the by-product. The joint production cost amounting to P5,280,000.00 for August 2023. Requirements: 1. Calculate the joint cost to be allocated to the main products using the sales value method 2. Calculate the joint cost to be allocated to the main products using the NRV method 3. Determine which of the two main products should the company process further.
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