Problem 2. Lucky Company produces two rice-based instant noodles-Lucky Him (tiny noodles) and Lucky Her (large noodles) from common inputs, flour and spices. A waste product results from the joint process which is sold to cattle ranchers at P10 per ton. The revenue from the sale of by-product is treated as other sales revenue. At split off point, the main products can be sold to companies who package and sell them under their own branch names. With the rising popularity of noodles as a meal, Lucky Company add bits of preprocessed vegetables to Lucky Him and Lucky Her, package them, and sell them under the brand names Nissins and Ramens. Lucky Him Lucky Her Costs of flour and spices Production in tons Joint Costs P1,200,000 5,000 tons of BP 50,000 50,000 P20 100,000 100,000 P30 Sales in tons Selling price per ton Separable costs of processing 50,000 tons of Lucky Him into 60,000 tons of Nissins Separable costs of processing 100,000 tons of Lucky Her into 120,000 tons of Ramens P240,000 P840,000 Production in tons Selling price per ton Nissins 60,000 P36 Ramens 120,000 P50 REQUIRED: 1. Allocate the joint costs using sales value method. 2. Compute the gross profit if (a) main products are sold at split off point and (b) main products are processed further to become Nissins and Ramens.

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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Transcribed Image Text:Problem 2. Lucky Company produces two rice-based instant noodles-Lucky Him (tiny noodles) and Lucky Her (large noodles) from common inputs, flour and spices. A waste product results from the joint process which is sold to cattle ranchers at P10 per ton. The revenue from the sale of by-product is treated as other sales revenue. At split off point, the main products can be sold to companies who package and sell them under their own branch names. With the rising popularity of noodles as a meal, Lucky Company add bits of preprocessed vegetables to Lucky Him and Lucky Her, package them, and sell them under the brand names Nissins and Ramens. Joint Costs Lucky Him Lucky Her Costs of flour and spices Production in tons Sales in tons P1,200,000 5,000 tons of BP 50,000 50,000 P20 P240,000 100,000 100,000 P30 Selling price per ton Separable costs of processing 50,000 tons of Lucky Him into 60,000 tons of Nissins Separable costs of processing 100,000 tons of Lucky Her into 120,000 tons of Ramens P840,000 Nissins Ramens Production in tons 60,000 P36 120,000 P50 Selling price per ton REQUIRED: 1. Allocate the joint costs using sales value method. 2. Compute the gross profit if (a) main products are sold at split off point and (b) main products are processed further to become Nissins and Ramens.

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