It's mind-boggling the number of products that are made with cotton. From salad dressing, to T-shirts, to diapers, to animal seed, the possibilities are practically endless. Here is just one combination of products that could be produced from raw cotton, along with a variety of ways the manufacturer could allocate costs between the products. Let's start with the joint cleaning and separation process, which allows for the cotton seed and the lint to be separately identifiable. The following quantities of cotton seed and lint were produced for a total cost (including the raw cotton and processing costs) of $232,000. 435,000 pounds of cotton seed 315,000 pounds of lint (fiber) Both of these products can be sold at this point, or they can be processed further. In their present state, they're worth: $0.13 per pound for cotton seed $0.75 per pound for lint This particular company presses the cotton seed to make oil and uses the lint to make thread. The additional costs and processes generate higher sales values for the final products, as follows. Seed/Oil Lint/Thread Additional cost Final sales value $21,000 $79,200 $84,000 $335,000 (a) Allocate the joint process costs using the sales value at split-off method. (Round proportion to 2 decimal places, e.g. 0.25 and final answers to O decimal places, e.g. 5,125.) Seed Share of joint cost $ Lint
It's mind-boggling the number of products that are made with cotton. From salad dressing, to T-shirts, to diapers, to animal seed, the possibilities are practically endless. Here is just one combination of products that could be produced from raw cotton, along with a variety of ways the manufacturer could allocate costs between the products. Let's start with the joint cleaning and separation process, which allows for the cotton seed and the lint to be separately identifiable. The following quantities of cotton seed and lint were produced for a total cost (including the raw cotton and processing costs) of $232,000. 435,000 pounds of cotton seed 315,000 pounds of lint (fiber) Both of these products can be sold at this point, or they can be processed further. In their present state, they're worth: $0.13 per pound for cotton seed $0.75 per pound for lint This particular company presses the cotton seed to make oil and uses the lint to make thread. The additional costs and processes generate higher sales values for the final products, as follows. Seed/Oil Lint/Thread Additional cost Final sales value $21,000 $79,200 $84,000 $335,000 (a) Allocate the joint process costs using the sales value at split-off method. (Round proportion to 2 decimal places, e.g. 0.25 and final answers to O decimal places, e.g. 5,125.) Seed Share of joint cost $ Lint
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:It's mind-boggling the number of products that are made with cotton. From salad dressing, to T-shirts, to diapers, to animal seed, the
possibilities are practically endless. Here is just one combination of products that could be produced from raw cotton, along with a
variety of ways the manufacturer could allocate costs between the products.
Let's start with the joint cleaning and separation process, which allows for the cotton seed and the lint to be separately identifiable.
The following quantities of cotton seed and lint were produced for a total cost (including the raw cotton and processing costs) of
$232,000.
435,000 pounds of cotton seed
315,000 pounds of lint (fiber)
Both of these products can be sold at this point, or they can be processed further. In their present state, they're worth:
$0.13 per pound for cotton seed
$0.75 per pound for lint
This particular company presses the cotton seed to make oil and uses the lint to make thread. The additional costs and processes
generate higher sales values for the final products, as follows.
Seed/Oil
Lint/Thread
Additional cost
Final sales value
$21,000
$79,200
$84,000
$335,000
(a)
Allocate the joint process costs using the sales value at split-off method. (Round proportion to 2 decimal places, e.g. 0.25 and final
answers to O decimal places, e.g. 5,125.)
Seed
Share of joint cost
$
Lint
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