Soy Products (DSP) buys soybeans and processes them into other soy products. Each ton of soybeans that DSP purchases for $260 can be converted for an additional $170 into 575lbs of soy meal and 140 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.48 and soy oil can be sold in bulk for $4.75 per gallon. DSP can process the 575 pounds of soy meal into 725 pounds of soy cookies at an additional cost of $370.Each pound of soy cookies can be sold for $2.48 per pound. The 140gallons of soy oil can be packaged at a cost of $200 and made into 560quarts of Soyola. Each quart of Soyola can be sold for $1.45. ### Joint Cost Allocation Example#### Requirement 1. Allocate the joint cost to the cookies and the Soyola using the following methods: a. **Sales Value at Splitoff Method** b. **Net Realizable Value (NRV) Method**#### Step a: Allocate the joint cost using the Sales Value at Splitoff Method.- **Instructions**: Round the weights to three decimal places and joint costs to the nearest dollar.#### Allocation Table| Product | Cookies/Soy Meal | Soyola/Soy Oil | Total ||-----------|------------------|----------------|-------|| **Sales value of total production at splitoff** | | | || **Weighting** | | | || **Joint costs allocated** | | | |#### Additional Requirements:1. **Allocate the Joint Cost**: - Apply the **Sales Value at Splitoff Method**. - Apply the **NRV Method**.2. **Decision Analysis**: - Consider whether DSP should have processed each of the products further. - Evaluate the effect of the allocation method on this decision.This exercise is essential for understanding cost allocation in production processes where joint products are created.

Joint cost arises when an organization produces several products and its cost function is not…

Answered: Soy Products (DSP) buys soybeans and…

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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Soy Products (DSP) buys soybeans and processes them into other soy products. Each ton of soybeans that DSP purchases for $260 can be converted for an additional $170 into 575lbs of soy meal and 140 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.48 and soy oil can be sold in bulk for $4.75 per gallon. DSP can process the 575 pounds of soy meal into 725 pounds of soy cookies at an additional cost of $370.

Each pound of soy cookies can be sold for $2.48 per pound. The 140
gallons of soy oil can be packaged at a cost of $200 and made into 560
quarts of Soyola. Each quart of Soyola can be sold for $1.45.

### Joint Cost Allocation Example

#### Requirement 1. Allocate the joint cost to the cookies and the Soyola using the following methods:
a. **Sales Value at Splitoff Method**
b. **Net Realizable Value (NRV) Method**

#### Step a: Allocate the joint cost using the Sales Value at Splitoff Method.

- **Instructions**: Round the weights to three decimal places and joint costs to the nearest dollar.

#### Allocation Table

| Product | Cookies/Soy Meal | Soyola/Soy Oil | Total |
|-----------|------------------|----------------|-------|
| **Sales value of total production at splitoff** | | | |
| **Weighting** | | | |
| **Joint costs allocated** | | | |

#### Additional Requirements:

1. **Allocate the Joint Cost**:
- Apply the **Sales Value at Splitoff Method**.
- Apply the **NRV Method**.

2. **Decision Analysis**:
- Consider whether DSP should have processed each of the products further.
- Evaluate the effect of the allocation method on this decision.

This exercise is essential for understanding cost allocation in production processes where joint products are created.

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