Alternative methods of joint-cost allocation, product –mix decisions. The Chicago oil company buys crude vegetable oil. Refining this oil results in four products at the splitoff point:A,B,C and D. Product C is fully processed by the splitoff point. Products A,B and D can individually be futher refined into super A, super B and super D. In the most recent month (November),the output at the splitoff point was as follows: Product A, 550,000 gallonsProduct B, 200,000 gallons• Product C, 150,000 gallons• Product D, 100,000 gallonsThe joint costs of purchasing and processing the crude vegetable oil were $210,000. Chicago had no begin-ning or ending inventories. Sales of product C in November were $90,000. Products A, B, and D were furtherrefined and then sold. Data related to November are as follows:Separable Processing Costs to Make Super Products$480,000RevenuesSuper ASuper BSuper D$750,000300,000150,000120,00090,000Chicago had the option of selling products A, B, and D at the splitoff point. This alternative would haveyielded the following revenues for the November production:Product A, $150,000Product B, $125,000Product D, $135,0001. Compute the gross-margin percentage for each product sold in November, using the following methodsfor allocating the $210,000 joint costs:a. Sales value at splitoffb. Physical measurec. NRV2. Could Chicago Oil have increased its November operating income by making different decisions aboutthe further processing of products A, B, or D? Show the effect on operating income of any changes yourecommend.Required

Sales Value at Split off Method: Sales value at split off method allocates joint cost to each joint…

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FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Alternative methods of joint-cost allocation, product –mix decisions. The Chicago oil company buys crude vegetable oil. Refining this oil results in four products at the splitoff point:A,B,C and D. Product C is fully processed by the splitoff point. Products A,B and D can individually be futher refined into super A, super B and super D. In the most recent month (November),the output at the splitoff point was as follows:

Product A, 550,000 gallons
Product B, 200,000 gallons
• Product C, 150,000 gallons
• Product D, 100,000 gallons
The joint costs of purchasing and processing the crude vegetable oil were $210,000. Chicago had no begin-
ning or ending inventories. Sales of product C in November were $90,000. Products A, B, and D were further
refined and then sold. Data related to November are as follows:
Separable Processing Costs to Make Super Products
$480,000
Revenues
Super A
Super B
Super D
$750,000
300,000
150,000
120,000
90,000
Chicago had the option of selling products A, B, and D at the splitoff point. This alternative would have
yielded the following revenues for the November production:
Product A, $150,000
Product B, $125,000
Product D, $135,000
1. Compute the gross-margin percentage for each product sold in November, using the following methods
for allocating the $210,000 joint costs:
a. Sales value at splitoff
b. Physical measure
c. NRV
2. Could Chicago Oil have increased its November operating income by making different decisions about
the further processing of products A, B, or D? Show the effect on operating income of any changes you
recommend.
Required

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