Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 16, Problem 16.25E
Joint costs and decision making. Jack Bibby is a prospector in the Texas Panhandle. He has also been running a side business for the past couple of years. Based on the popularity of shows such as “Rattlesnake Nation,” there has been a surge of interest from professionals and amateurs to visit the northern counties of Texas to capture snakes in the wild. Jack has set himself up as a purchaser of these captured snakes.
Jack purchases rattlesnakes in good condition from “snake hunters” for an average of $11 per snake. Jack produces canned snake meat, cured skins, and souvenir rattles, although he views snake meat as his primary product. At the end of the recent season, Jack Bibby evaluated his financial results:
The cost of snakes is assigned to each product line using the relative sales value of meat, skins, and rattles (i.e., the percentage of total sales generated by each product). Processing expenses are directly traced to each product line.
Jack has a philosophy of every product line paying for itself and is determined to cut his losses on rattles.
- 1. Should Jack Bibby drop rattles from his product offerings? Support your answer with computations.
Required
- 2. An old miner has offered to buy every rattle “as is” for $0.60 per rattle (note: “as is” refers to the situation where Jack only removes the rattle from the snake and no
processing costs are incurred). Assume that Jack expects to process the same number of snakes each season. Should he sell rattles to the miner? Support your answer with computations.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Harriet Moore is an accountant for New World Pharmaceuticals. Her duties include tracking research and development spending in the new product development division. Over the course of the past six months, Harriet has noticed that a great deal of funds have been spent on a particular project for a new drug. She hears “through the grapevine” that the company is about to patent the drug and expects it to be a major advance in antibiotics. Harriet believes that this new drug will greatly improve company performance and will cause the company’s stock to increase in value. Harriet decides to purchase shares of New World in order to benefit from this expected increase. Required What are Harriet’s ethical responsibilities, if any, with respect to the information she has learned through her duties as an accountant for New World Pharmaceuticals? What are the implications of her planned purchase of New World shares?
Imagine that you are an accountant working for Los Angels Group. Mr. Todd Smith, an investor, moving from California to Texas, is an eager investor looking to set up a business in the Southeast Texas area decided to invest in the 60x rooms hotel close to the new location of the Tesla manufacturing warehouse and Amazon fulfillment center.Mr. Smith is undecided on what type of benefit packages his company can offer to promote employee retention while maximizing profits. Mr. Smith reached the Los Angels Group for advice on the pros and cons of offering employees retirement benefits. Mr. Smith is interested in maximizing revenues, decreasing tax obligations, and increasing employee retention. Mr. Smith needs to make a decision by 05/22/24.
Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information.
1.
Five used vans would cost a total of $75,551 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation.
2.
Ten drivers would have to be employed at a total payroll expense of $48,300.
3.
Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,200, Maintenance $3,300, Repairs $3,800, Insurance…
Chapter 16 Solutions
Cost Accounting (15th Edition)
Ch. 16 - Give two examples of industries in which joint...Ch. 16 - What is a joint cost? What is a separable cost?Ch. 16 - Distinguish between a joint product and a...Ch. 16 - Why might the number of products in a joint-cost...Ch. 16 - Provide three reasons for allocating joint costs...Ch. 16 - Why does the sales value at splitoff method use...Ch. 16 - Prob. 16.7QCh. 16 - Distinguish between the sales value at splitoff...Ch. 16 - Give two limitations of the physical-measure...Ch. 16 - How might a company simplify its use of the NRV...
Ch. 16 - Why is the constant gross-margin percentage NRV...Ch. 16 - Managers must decide whether a product should be...Ch. 16 - Prob. 16.13QCh. 16 - Describe two major methods to account for...Ch. 16 - Why might managers seeking a monthly bonus based...Ch. 16 - Prob. 16.16ECh. 16 - Prob. 16.17ECh. 16 - Prob. 16.18ECh. 16 - Prob. 16.19ECh. 16 - Prob. 16.20ECh. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Joint costs and decision making. Jack Bibby is a...Ch. 16 - Joint costs and byproducts. (W. Crum adapted)...Ch. 16 - Prob. 16.27PCh. 16 - Prob. 16.28PCh. 16 - Prob. 16.29PCh. 16 - Prob. 16.30PCh. 16 - Prob. 16.31PCh. 16 - Prob. 16.32PCh. 16 - Prob. 16.33PCh. 16 - Prob. 16.34PCh. 16 - Prob. 16.35PCh. 16 - Prob. 16.36PCh. 16 - Methods of joint-cost allocation, comprehensive....
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information. 1. 2. 3. 4. 5. Five used vans would cost a total of $75,000 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation. Ten drivers would have to be employed at a total payroll expense of $48,000. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,000, Maintenance $3,300, Repairs $4,000, Insurance $4,200, and…arrow_forwardThree recent computer-science graduates are forming a company to write and distribute software for various personal computers. Initially, the company will operate in Eastern Australia. Twelve serious prospects for retail outlets have already been identified and committed to the firm. The firm’s software products have been tested and displayed at several trade shows and computer fairs in the perceived operating region. All that is lacking is adequate financing to continue with the project . A small group of private investors is interested in financing the company. Two financing proposals are being evaluated. (A 34% tax rate is appropriate for this analysis.) 1) Plan A is an all-ordinary share capital structure. ‒ $2m dollars would be raised by selling shares at $10 each. 2) Plan B would involve the use of financial leverage. ‒ $1m dollars would be raised selling bonds with an effective interest rate of 11% per annum. ‒ The remaining $1m would be raised by selling shares at the $10 price…arrow_forwardPiscataway valves decided to pursue development of a new product line for natural gas pipelines. The development effort has been successful and Piscataway is preparing to begin manufacturing and marketing the new product line next year. Piscataway has learned that marketing to natural gas pipeline companies requires commercial skills and experience they do not have. Management has, as a consequence, decided to have a partner and are in serious discussions with two companies having the requisite marketing expertise: Fargo Pipeline Supplies (FPS) and Quantum International (QI) Note: For this question, all cash flows are incremental cash flows. Part A: FPS Proposal FPS would provide only marketing, sales, and distribution for natural gas pipeline valves. Piscataway would have to invest in faciliites to manufacture the valves, spending $7,465 in Year 0 Piscataway would have to invest in facilites to manufacture the valves, manufacture the valves themselves, and incur administrative…arrow_forward
- Hh.arrow_forwardGary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes. At the end of the year, Gary needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively. Four-Wheelers Personal Watercraft Snowmobiles Sales $1,126,000 $1,416,000 $1,996,000 Payroll Maintenance IT Four-Wheelers Watercraft Snowmobiles Costs $95,000…arrow_forwardPlease help me. Thankyou.arrow_forward
- Mr. Andrei Taopani, along with three good friends, started his own farm business operations in Manggarai, East Nusa Tenggara (NTT). The business began with 2 superior heifers and 20 male and female young cows. After the first year of the livestock business, the partners profit, and everything seems to be going well. Young cows are bred every year using extraordinary new techniques, and the cattle population grows to 100 in two years. Most heifers (superior) will produce twins, and 90 percent are bulls. This allows for the remaining 10 percent nurseries in the future.At present the operation requires new investments, so that new investor partners are limitedly invited to join the partnership with an initial investment of Rp 200,000,000 each. Partnership interests are advertised as "definitely profitable" and "very exclusive." In an interview with reporters, Mr. Andrei described the investment with the tagline "double your money, with a risk-free business". He persuaded investors that…arrow_forwardYou work for a moderately successful business that owns as a retail propane division. This division buys wholesale propane from national distributors and sells it to end users, specifically farms, rural homes, and businesses. Your customers are beyond the reach of natural gas retail pipeline companies called Local Distribution Companies (LDC's). The price you charge includes delivery in your company owned trucks. Your manager has asked you to look at an opportunity to buy out a competitor. He needs a quick evaluation of this opportunity. This is not a request for a full-blown analysis with bankers and lawyers, but simply if this opportunity should take priority over other efforts. You are being asked for a quick analysis considering everything you know about the opportunity. Your company is a moderately sized business vulnerable to larger competitors. You may consider growth to be a good idea to enhance corporate value generating incremental profits and allow greater economy of scale,…arrow_forwardRoald is the sales manager for a small regional manufacturing firm you own. You have asked him to put together a plan for expanding into nearby markets. You know that Roalds previous job had him working closely with many of your competitors in this new market, and you believe he will be able to facilitate the company expansion. He is to prepare a presentation to you and your partners outlining his strategy for taking the company into this expanded market. The day before the presentation, Roald comes to you and explains that he will not be making a presentation on market expansion but instead wants to discuss several ways he believes the company can reduce both fixed and variable costs. Why would Roald want to focus on reducing costs rather than on expanding into a new market?arrow_forward
- Harold McWilliams owns and manages a general merchandise store in a rural area of Virginia. Harold sells appliances, clothing, auto parts, and farming equipment, among a wide variety of other types of merchandise. Because of normal seasonal and cyclical fluctuations in the local economy, he knows that his business will also have these fluctuations, and he is planning to use CVP analysis to help him understand how he can expect his profits to change with these fluctuations. Harold has the following information for his most recent year. Cost of goods sold represents the cost paid for the merchandise he sells, while operating costs represent rent, insurance, and salaries, which are entirely fixed. Sales $ 740,000 Cost of merchandise sold 407,000 Contribution margin 333,000 Operating costs 153,900 Operating profit $ 179,100 Required: What is Harold’s margin of safety (MOS) in dollars? (Do not round intermediate calculations.) What is the margin of safety (MOS) ratio?…arrow_forwardHarold McWilliams owns and manages a general merchandise store in a rural area of Virginia. Harold sells appliances, clothing, auto parts, and farming equipment, among a wide variety of other types of merchandise. Because of normal seasonal and cyclical fluctuations in the local economy, he knows that his business will also have these fluctuations, and he is planning to use CVP analysis to help him understand how he can expect his profits to change with these fluctuations. Harold has the following information for his most recent year. Cost of goods sold represents the cost paid for the merchandise he sells, while operating costs represent rent, insurance, and salaries, which are entirely fixed. Sales Cost of merchandise sold Contribution margin Operating costs Operating profit. Required: 1-a. What is Harold's margin of safety (MOS) in dollars? (Do not round intermediate calculations.) 1-b. What is the margin of safety (MOS) ratio? (Input your answer as a percentage rounded to 2 decimal…arrow_forwardRichard is the operating manager of Sheridan, a company that manufactures three different types of all-terrain vehicles: four- wheelers, personal watercraft, and snowmobiles. Naturally, Richard has the opportunity to test all of these products for quality- control purposes. At the end of the year, Richard needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively. Sales Four-Wheelers IT hours $1,132,000 Costs Number of employees Maintenance hours Personal Watercraft Payroll $94,000 2 100 150 $1,399,000…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Relevant Costing Explained; Author: Kaplan UK;https://www.youtube.com/watch?v=hnsh3hlJAkI;License: Standard Youtube License