Q3. (Horngren) Inorganic Chemicals (IC) processes salt into various industrial products. In July 2020, IC incurred joint costs of $100,000 to purchase salt and convert it into two products: caustic soda and chlorine. Although there is an active outside market for chlorine, IC processes all 800 tons of chlorine it produces into 500 tons of PVC (polyvinyl chloride), which is then sold. There were no beginning or ending inventories of salt, caustic soda, chlorine, or PVC in July. Information for July 2012 production and sales follows: . Joint Costs : & 100,000 . Caustic Soda :1,200 tons, $50/ton . Chlorine : 800 tons, $75 . PVC : 500 tons, $200 . Separable cost of processing 800 tons chlorine into 500 tons PVC : $20,000 Instructions, Determine. 1. Allocate the joint costs of $100,000 between caustic soda and PVC under (a) the sales value at split off method and (b) the physical-measure method. 2. Allocate the joint costs of $ 100,000 between caustic soda and PVC under the NRV method.
Q3. (Horngren) Inorganic Chemicals (IC) processes salt into various industrial products. In July 2020, IC incurred joint costs of $100,000 to purchase salt and convert it into two products: caustic soda and chlorine. Although there is an active outside market for chlorine, IC processes all 800 tons of chlorine it produces into 500 tons of PVC (polyvinyl chloride), which is then sold. There were no beginning or ending inventories of salt, caustic soda, chlorine, or PVC in July. Information for July 2012 production and sales follows: . Joint Costs : & 100,000 . Caustic Soda :1,200 tons, $50/ton . Chlorine : 800 tons, $75 . PVC : 500 tons, $200 . Separable cost of processing 800 tons chlorine into 500 tons PVC : $20,000 Instructions, Determine. 1. Allocate the joint costs of $100,000 between caustic soda and PVC under (a) the sales value at split off method and (b) the physical-measure method. 2. Allocate the joint costs of $ 100,000 between caustic soda and PVC under the NRV method.
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Transcribed Image Text:Q3. Horngren) Inorganic Chemicals (IC) processes salt into various industrial
products. In July 2020, IC incurred joint costs of $100,000 to purchase salt
and convert it into two products: caustic soda and chlorine. Although there is
an active outside market for chlorine, IC processes all 800 tons of chlorine it
produces into 500 tons of PVC (polyvinyl chloride), which is
then sold. There were no beginning or ending inventories of salt, caustic
soda, chlorine, or PVC in July. Information for July 2012 production and sales
follows:
Joint Costs : &100,000
. Caustic Soda :1,200 tons, $50/ton
. Chlorine : 800 tons, $75
. PVC : 500 tons, $200
Separable cost of processing 800 tons chlorine into 500 tons PVC :
$20,000
Instructions, Determine.
1. Allocate the joint costs of $100,000 between caustic soda and PVC under
(a) the sales value at split off method and (b) the physical-measure method.
2. Allocate the joint costs of $100,000 between caustic soda and PVC under
the NRV method.
3. Under the three allocation methods in requirements 1 and 2, what is the
gross-margin percentage of (a) caustic soda and (b) PVC?
4. Lifetime Swimming Pool Products offers to purchase 800 tons of chlorine in
August 2020 at $75 per ton. Assume all other production and sales data are
the same for August as they were for July. This sale of chlorine to Lifetime
would mean that no PVC would be produced by IC in August. How would
accepting this offer affect IC' s August 2020 operating income?
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