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Lipton Liquids produces three products by a joint production process. Raw materials are put into production in Department 1, and at the end of processing in this department, three products appear. Alpha is sold at the split-off point with no further processing. Beta and Gamma require further processing before they are sold. Beta is processed in Department 2, and Gamma is processed in Department 3. Lipton Liquids uses the estimated net realizable value method of allocating joint production costs. No inventories were on hand at July 1, the beginning of the quarter. No raw material was on hand at September 30. All units on hand at September 30 were fully complete as to processing. Following is a summary of costs and other data for the period ended September 30: Products Units sold Units on hand at September 30 Sales revenues Departments Raw material cost. Direct labor cost Manufacturing overhead Required: Beta 96,760 Gamma 114,800 Alpha 32,800 82,000 0 65,600 $ 147,600 $ 870,840 $ 1,205,400 1 2 3 $ 551,040 236,160 98,400 $ 0 $ 0 398,028 103,812 943,410 360,390 a. Determine the following amounts for each product: (1) estimated net realizable value used for allocating joint costs, (2) joint costs allocated to each of the three products, (3) cost of goods sold, and (4) finished goods inventory costs, September 30. b. Assume that the entire output of Alpha could be processed further at an additional cost of $12.00 per unit and then sold for $16.30 per unit. Compute the incremental income from further processing Alpha. c. Considering the results of part b, should Lipton Liquids process Alpha further?

Lipton Liquids produces three products by a joint production process. Raw materials are put into production in Department 1, and at the end of processing in this department, three products appear. Alpha is sold at the split-off point with no further processing. Beta and Gamma require further processing before they are sold. Beta is processed in Department 2, and Gamma is processed in Department 3. Lipton Liquids uses the estimated net realizable value method of allocating joint production costs. No inventories were on hand at July 1, the beginning of the quarter. No raw material was on hand at September 30. All units on hand at September 30 were fully complete as to processing. Following is a summary of costs and other data for the period ended September 30: Products Units sold Units on hand at September 30 Sales revenues Departments Raw material cost. Direct labor cost Manufacturing overhead Required: Beta 96,760 Gamma 114,800 Alpha 32,800 82,000 0 65,600 $ 147,600 $ 870,840 $ 1,205,400 1 2 3 $ 551,040 236,160 98,400 $ 0 $ 0 398,028 103,812 943,410 360,390 a. Determine the following amounts for each product: (1) estimated net realizable value used for allocating joint costs, (2) joint costs allocated to each of the three products, (3) cost of goods sold, and (4) finished goods inventory costs, September 30. b. Assume that the entire output of Alpha could be processed further at an additional cost of $12.00 per unit and then sold for $16.30 per unit. Compute the incremental income from further processing Alpha. c. Considering the results of part b, should Lipton Liquids process Alpha further?

Cornerstones of Cost Management (Cornerstones Series)
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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Lipton Liquids produces three products by a joint production process. Raw materials are put into production in Department 1, and at the end of processing in this department, three products appear. Alpha is sold at the split-off point with no further processing. Beta and Gamma require further processing before they are sold. Beta is processed in Department 2, and Gamma is processed in Department 3. Lipton Liquids uses the estimated net realizable value method of allocating joint production costs. No inventories were on hand at July 1, the beginning of the quarter. No raw material was on hand at September 30. All units on hand at September 30 were fully complete as to processing. Following is a summary of costs and other data for the period ended September 30: Products Units sold Units on hand at September 30 Sales revenues Departments Raw material cost. Direct labor cost Manufacturing overhead Required: Beta 96,760 Gamma 114,800 Alpha 32,800 82,000 0 65,600 $ 147,600 $ 870,840 $ 1,205,400 1 2 3 $ 551,040 236,160 98,400 $ 0 $ 0 398,028 103,812 943,410 360,390 a. Determine the following amounts for each product: (1) estimated net realizable value used for allocating joint costs, (2) joint costs allocated to each of the three products, (3) cost of goods sold, and (4) finished goods inventory costs, September 30. b. Assume that the entire output of Alpha could be processed further at an additional cost of $12.00 per unit and then sold for $16.30 per unit. Compute the incremental income from further processing Alpha. c. Considering the results of part b, should Lipton Liquids process Alpha further?
Transcribed Image Text:Lipton Liquids produces three products by a joint production process. Raw materials are put into production in Department 1, and at the end of processing in this department, three products appear. Alpha is sold at the split-off point with no further processing. Beta and Gamma require further processing before they are sold. Beta is processed in Department 2, and Gamma is processed in Department 3. Lipton Liquids uses the estimated net realizable value method of allocating joint production costs. No inventories were on hand at July 1, the beginning of the quarter. No raw material was on hand at September 30. All units on hand at September 30 were fully complete as to processing. Following is a summary of costs and other data for the period ended September 30: Products Units sold Units on hand at September 30 Sales revenues Departments Raw material cost. Direct labor cost Manufacturing overhead Required: Beta 96,760 Gamma 114,800 Alpha 32,800 82,000 0 65,600 $ 147,600 $ 870,840 $ 1,205,400 1 2 3 $ 551,040 236,160 98,400 $ 0 $ 0 398,028 103,812 943,410 360,390 a. Determine the following amounts for each product: (1) estimated net realizable value used for allocating joint costs, (2) joint costs allocated to each of the three products, (3) cost of goods sold, and (4) finished goods inventory costs, September 30. b. Assume that the entire output of Alpha could be processed further at an additional cost of $12.00 per unit and then sold for $16.30 per unit. Compute the incremental income from further processing Alpha. c. Considering the results of part b, should Lipton Liquids process Alpha further?
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