LO.3 (Approximated net realizable value method) The Scent of Money makes three products that can be sold at split-off or processed further and then sold. The joint cost for April 2010 is $1,080,000. Separate Cost after Bottles of Output Sales Price at Final Sales Product Split-Off Split-Off Price Perfume 20,000 $7.00 $2.50 $16.50 Eau de toilette 32,000 500 1.50 13.00 Body splash 28,000 500 2.00 12.00 The number of ounces in a bottle of cach product is: perfume, 1; eau de toilette, 2; and body splash, 3. Assume that all products are processed further after split-off. a. Allocate the joint cost based on the number of bottles, weight, and approximated net realizable values at split-off. (Round to the nearest whole percentage.) b. Assume that all products are processed further and completed. At the end of the period, the inventories are as follows: perfume, 600 bottles; eau de toilette, 1,600 bottles; and body splash, 1,680 bottles. Determine the values of the inventories based on answers obtained in (a). (Round per-unit costs to the nearest cent.) c. Do you see any problems with the allocation based on approximated net realizable value?

LO.3 (Approximated net realizable value method) The Scent of Money makes three products that can be sold at split-off or processed further and then sold. The joint cost for April 2010 is $1,080,000. Separate Cost after Bottles of Output Sales Price at Final Sales Product Split-Off Split-Off Price Perfume 20,000 $7.00 $2.50 $16.50 Eau de toilette 32,000 500 1.50 13.00 Body splash 28,000 500 2.00 12.00 The number of ounces in a bottle of cach product is: perfume, 1; eau de toilette, 2; and body splash, 3. Assume that all products are processed further after split-off. a. Allocate the joint cost based on the number of bottles, weight, and approximated net realizable values at split-off. (Round to the nearest whole percentage.) b. Assume that all products are processed further and completed. At the end of the period, the inventories are as follows: perfume, 600 bottles; eau de toilette, 1,600 bottles; and body splash, 1,680 bottles. Determine the values of the inventories based on answers obtained in (a). (Round per-unit costs to the nearest cent.) c. Do you see any problems with the allocation based on approximated net realizable value?

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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9. Ralston Dairy gathered this data about the two products that it produces: Product Current Sales Value Estimated Added Processing Cost Sales Value If Processed Further Frozen yogurt $8,000 $2,000 $11,000 Ice Cream 12,000 7,000 18,000 PLEASE NOTE: All dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). If needed, a Net Loss or decrease will be shown in whole dollars with "$" and parentheses - ($12,345). If processed further, what is the Frozen Yogurt's incremental profit or loss? If processed further, what is the Ice Cream's incremental profit or loss? Which of the products should be processed further? . Please note: Your answer is either "Frozen Yogurt" or "Ice Cream" - capital first letters and no quotes.
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