Striker Chemical Lab manufactures liquids into three different outputs: Freisa, Bracko, and Pragin. Freisa accounts for 56 percent of the net realizable value at the split-off point, Bracko accounts for 29 percent, and Pragin accounts for the balance. The joint costs total $644,000. If Pragin is accounted for as a by-product, its $74,000 net realizable value at split-off is credited to the joint manufacturing costs by crediting the by-product’s net realizable value as a reduction in the joint costs. Questions: How should management decide whether a product should be sold at splitoff or processed further? Explain for Striker if the sales value at split off method of joint-cost allocation is the best method for generating the information needed to make a decision. What does this mean for the by-product output Pragin?
Striker Chemical Lab manufactures liquids into three different outputs: Freisa, Bracko, and Pragin. Freisa accounts for 56 percent of the net realizable value at the split-off point, Bracko accounts for 29 percent, and Pragin accounts for the balance. The joint costs total $644,000. If Pragin is accounted for as a by-product, its $74,000 net realizable value at split-off is credited to the joint manufacturing costs by crediting the by-product’s net realizable value as a reduction in the joint costs. Questions: How should management decide whether a product should be sold at splitoff or processed further? Explain for Striker if the sales value at split off method of joint-cost allocation is the best method for generating the information needed to make a decision. What does this mean for the by-product output Pragin?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Striker Chemical Lab manufactures liquids into three different outputs: Freisa, Bracko, and Pragin. Freisa accounts for 56 percent of the net realizable value at the split-off point, Bracko accounts for 29 percent, and Pragin accounts for the balance. The joint costs total $644,000. If Pragin is accounted for as a by-product, its $74,000 net realizable value at split-off is credited to the joint
Questions:
- How should management decide whether a product should be sold at splitoff or processed further?
- Explain for Striker if the sales value at split off method of joint-cost allocation is the best method for generating the information needed to make a decision. What does this mean for the by-product output Pragin?
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