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
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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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:
Transcribed Image Text: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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 7 steps with 6 images
Knowledge Booster
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education