Question 7.4 The Dairy Company produces three products from a joint processes using whole milk: butter, cheese, and cream. The joint costs amount to $24,000 per batch of output. Each batch totals 50,000 liters: 25% butter, 25% cheese, 50% cream. All products are processed further without gain or loss in volume. Separable costs are butter, $0.50 per liter; cheese, $2.00 per liter; cream, $0.25 per liter. The selling prices per liter are respectively: $3.50, $6.00, $4.00. Required:How much joint cost per batch should be allocated to cream, assuming that joint costs are allocated on a physical measure basis?If joint costs are assigned on a net realizable value basis, how much joint cost should be allocated to cheese?An organic grocer has offered to buy all of the cheese produced at $5.50 per liter. Traditionally 90% of the cheese production is sold. How much better or worse off financially is the company from accepting this offer?

Joint cost arises when two or more products produces jointly and can not be separable. There are…

Answered: The Dairy Company produces three…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question 7.4

The Dairy Company produces three products from a joint processes using whole milk: butter, cheese, and cream. The joint costs amount to $24,000 per batch of output. Each batch totals 50,000 liters: 25% butter, 25% cheese, 50% cream. All products are processed further without gain or loss in volume. Separable costs are butter, $0.50 per liter; cheese, $2.00 per liter; cream, $0.25 per liter. The selling prices per liter are respectively: $3.50, $6.00, $4.00.

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How much joint cost per batch should be allocated to cream, assuming that joint costs are allocated on a physical measure basis?
If joint costs are assigned on a net realizable value basis, how much joint cost should be allocated to cheese?
An organic grocer has offered to buy all of the cheese produced at $5.50 per liter. Traditionally 90% of the cheese production is sold. How much better or worse off financially is the company from accepting this offer?

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