McKenzie’s Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process that costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000 bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off point. Each product is processed further after the split-off point, but the market value of a bottle of any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs of morning glory, snowflake sparkle, and sea breeze hand soap are $0.50, $0.55, and $0.60 per bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for $2.00, $2.20, and $2.40 per bottle, respectively.Instructions1. Using the net realizable value method, allocate the joint costs of production to each product. 2. Explain why McKenzie’s Soap Sensations, Inc., always chooses to process each variety of hand soap beyond the split-off point.3. If demand for all products was the same, which product should McKenzie’s Soap Sensations, Inc., produce in the highest quantity?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

McKenzie’s Soap Sensations, Inc., produces hand soaps with three different scents: morning glory,
snowflake sparkle, and sea breeze. The soap is produced through a joint production process that
costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000
bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off
point. Each product is processed further after the split-off point, but the market value of a bottle of
any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs
of morning glory, snowflake sparkle, and sea breeze hand soap are $0.50, $0.55, and $0.60 per
bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for
$2.00, $2.20, and $2.40 per bottle, respectively.
Instructions
1. Using the net realizable value method, allocate the joint costs of production to each product.
2. Explain why McKenzie’s Soap Sensations, Inc., always chooses to process each variety
of hand soap beyond the split-off point.
3. If demand for all products was the same, which product should McKenzie’s Soap
Sensations, Inc., produce in the highest quantity?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Theory of Constraints (TOC)
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education