Forest Products, Incorporated, manufactures three products (FP-10, FP-20, and FP-40) from a single, joint input. None of the products can be sold without further processing. In November, joint product costs were $241,500. Additional information follows: Product FP-10 FP-20 FP-40 Units Produced 111,000 166,500 92,500 Sales Values $ 179,250 311,750 85,500 Processing Costs (After Split-Off) $ 29,500 109,500 25,500 The sale of FP-40 has been banned by a recent law. If FP-40 is produced, disposal in an approved manner costs $120,000 for every 92,500 units produced. Required: a. Assuming that Forest Products continues to use the physical quantities method of allocation and to manufacture and sell FP-10 and FP-20. What joint costs would be allocated to FP-10 and FP-20? b. There is a possibility that a market for FP-10 and FP-20 at split-off will develop. In other words, it will be possible to sell the two products rather than process them further. At what sales value (at split-off) would Forest Products be indifferent between selling them at split-off and processing them further? c. At what sales value (at split-off) would Forest Products be indifferent between selling them at split-off and processing them further, in case the disposal cost for FP-40 increases to $150,000 for every 92,500 units of FP-40 produced?
Forest Products, Incorporated, manufactures three products (FP-10, FP-20, and FP-40) from a single, joint input. None of the products can be sold without further processing. In November, joint product costs were $241,500. Additional information follows: Product FP-10 FP-20 FP-40 Units Produced 111,000 166,500 92,500 Sales Values $ 179,250 311,750 85,500 Processing Costs (After Split-Off) $ 29,500 109,500 25,500 The sale of FP-40 has been banned by a recent law. If FP-40 is produced, disposal in an approved manner costs $120,000 for every 92,500 units produced. Required: a. Assuming that Forest Products continues to use the physical quantities method of allocation and to manufacture and sell FP-10 and FP-20. What joint costs would be allocated to FP-10 and FP-20? b. There is a possibility that a market for FP-10 and FP-20 at split-off will develop. In other words, it will be possible to sell the two products rather than process them further. At what sales value (at split-off) would Forest Products be indifferent between selling them at split-off and processing them further? c. At what sales value (at split-off) would Forest Products be indifferent between selling them at split-off and processing them further, in case the disposal cost for FP-40 increases to $150,000 for every 92,500 units of FP-40 produced?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Gunston Processing produces two products, ALT-1 and ALT-2, from a batch using a single raw material, ALT-0. Both products require further processing before they be can be sold. A batch of ALT-1 can be sold for $150,750 after processing costs of $33,000. A batch of ALT-2 can be sold for $240,300 after further processing. The cost of ALT-0 is $200,000 for a batch. Using the estimated net realizable value method, a joint cost of $120,000 was allocated to ALT-2 for a batch.
Required:
Compute the separable processing cost for a batch of ALT-2.
Note: Do not round intermediate calculations.
Transcribed Image Text:Forest Products, Incorporated, manufactures three products (FP-10, FP-20, and FP-40) from a single, joint input. None of the products
can be sold without further processing. In November, joint product costs were $241,500. Additional information follows:
Product
FP-10
FP-20
FP-40
Units
Produced
111,000
166,500
92,500
Sales Values
$ 179,250
311,750
85,500
Processing
Costs (After
Split-Off)
$ 29,500
109,500
25,500
The sale of FP-40 has been banned by a recent law. If FP-40 is produced, disposal in an approved manner costs $120,000 for every
92,500 units produced.
Required:
a. Assuming that Forest Products continues to use the physical quantities method of allocation and to manufacture and sell FP-10 and
FP-20. What joint costs would be allocated to FP-10 and FP-20?
b. There is a possibility that a market for FP-10 and FP-20 at split-off will develop. In other words, it will be possible to sell the two
products rather than process them further. At what sales value (at split-off) would Forest Products be indifferent between selling
them at split-off and processing them further?
c. At what sales value (at split-off) would Forest Products be indifferent between selling them at split-off and processing them further,
in case the disposal cost for FP-40 increases to $150,000 for every 92,500 units of FP-40 produced?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education