Product A is processed further in the salting department at a cost of $27,000. It yields 12,000 pounds of salted peanuts, which are sold for $12 per pound. • Product B (raw peanuts) is sold without further processing at $3 per pound. Product C is considered a byproduct and is processed further in the paste department at a cost of $12,000. It yields 16,000 pounds of peanut butter, which are sold for $6 per pound. The company wants to make a gross margin of 10% of revenues on product C and needs to allow 20% of revenues for marketing costs on product C. An overview of operations follows: Joint Costs - Separable Costs - $180,000 Salted Peanuts Salting Department Processing $27,000 12,000 pounds 12,000 pounds $12/lb Raw Peanuts Peanuts Department Processing of 150,000 lb 65,000 pounds $3/lb Peanut Butter Paste Department Processing $12,000 16,000 16,000 pounds pounds $6/lb Splitoff Point 1. Compute unit costs per pound for products A, B, and C, treating Cas a byproduct. Use the NRV method for allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B. 2. Compute unit costs per pound for products A, B, and C, treating all three as joint products and allocat- ing joint costs by the NRV method. Required

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Joint costs and byproducts. (W. Crum adapted) Royston, Inc., is a large food-processing company. It processes 150,000 pounds of peanuts in the peanuts department at a cost of $180,000 to yield 12,000 pounds of product A, 65,000 pounds of product B, and 16,000 pounds of product C.

Product A is processed further in the salting department at a cost of $27,000. It yields 12,000 pounds of
salted peanuts, which are sold for $12 per pound.
• Product B (raw peanuts) is sold without further processing at $3 per pound.
Product C is considered a byproduct and is processed further in the paste department at a cost of
$12,000. It yields 16,000 pounds of peanut butter, which are sold for $6 per pound.
The company wants to make a gross margin of 10% of revenues on product C and needs to allow 20% of
revenues for marketing costs on product C. An overview of operations follows:
Joint Costs
- Separable Costs -
$180,000
Salted Peanuts
Salting Department
Processing
$27,000
12,000 pounds
12,000
pounds
$12/lb
Raw Peanuts
Peanuts Department
Processing
of 150,000 lb
65,000
pounds
$3/lb
Peanut Butter
Paste Department
Processing
$12,000
16,000
16,000 pounds
pounds
$6/lb
Splitoff
Point

1. Compute unit costs per pound for products A, B, and C, treating Cas a byproduct. Use the NRV method for
allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B.
2. Compute unit costs per pound for products A, B, and C, treating all three as joint products and allocat-
ing joint costs by the NRV method.
Required

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