Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 16, Problem 16.33P
Alternative methods of joint-cost allocation, product-mix decisions. The Chicago Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product C is fully processed by the splitoff point. Products A, B, and D can individually be further refined into Super A, Super B, and Super D. In the most recent month (November), the output at the splitoff point was as follows:
- Product A, 550,000 gallons
- Product B, 200,000 gallons
- Product C, 150,000 gallons
- Product D, 100,000 gallons
The joint costs of purchasing and processing the crude vegetable oil were $210,000. Chicago had no beginning or ending inventories. Sales of product C in November were $90,000. Products A, B, and D were further refined and then sold. Data related to November are as follows:
| Separable |
Revenues | |
| Super A | $480,000 | $750,000 |
| Super B | 120,000 | 300,000 |
| Super D | 90,000 | 150,000 |
Chicago had the option of selling products A, B, and D at the splitoff point. This alternative would have yielded the following revenues for the November production:
- Product A, $150,000
- Product B, $125,000
- Product D, $135,000
-
- 1. Compute the gross-margin percentage for each product sold in November, using the following methods for allocating the $210,000 joint costs:
Required
- a. Sales value at splitoff
- b. Physical measure
- c. NRV
- 2. Could Chicago Oil have increased its November operating income by making different decisions about the further processing of products A, B, or D? Show the effect on operating income of any changes you recommend
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Alternative methods of joint-cost allocation, product-mix decisions. The Chicago Oil Company buys crude vegetable oil. Rening this oil results in four products at the splitoff point: A, B, C, and D. Product C is fully processed by the splitoff point. Products A, B, and D can individually be further rened into Super A, Super B, and Super D. In the most recent month (November), the output at the splitoff point was as follows:
Ester Limited produces two products X and Y by producing a common raw material in a
common production process. The production for the month of April was 8000 units of X and
6000 units of Y. Whereas sales were 7000 units and 4000 units of X and Y respectively.
Following are the other details.
Selling price per unit at split off point is $25 and $20 of X and Y respectively
Selling price per unit after further processing is $60 for X and $80 for Y
Other expenses are as follows:
Further processing expense of X and Y is $29 and $38 respectively
Total Joint cost for the month is $80,000
Allocate Joint cost on the basis of:
(a) Market Value Split off method
(b) Net realizable value method
Cola Drink Company processes direct materials up to the splitoff point where two products, A
and B, are obtained. The following information was collected for the month of July:
Direct materials processed: 2,500 liters (with 20% shrinkage)
Production:
A
1,500 liters
B
500 liters
$15.00 per liter
$10.00 per liter
Sales:
A
В
The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point
to yield a total of 2,000 liters of good products was $4,500. There were no inventory balances
of A and B.
Product A may be processed further to yield 1,375 liters of Product Z5 for an additional
processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning
inventory and ending inventory was 125 liters.
Product B may be processed further to yield 375 liters of Product W3 for an additional
processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning
inventory and ending inventory was 25 liters.
5. When using sales…
Chapter 16 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th 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. 16.16MCQCh. 16 - Joint costs of 8,000 are incurred to process X and...Ch. 16 - Houston Corporation has two products, Astros and...Ch. 16 - Dallas Company produces joint products, TomL and...Ch. 16 - Earls Hurricane Lamp Oil Company produces both A-1...Ch. 16 - Joint-cost allocation, insurance settlement....Ch. 16 - Joint products and byproducts (continuation of...Ch. 16 - Net realizable value method. Sweeney Company is...Ch. 16 - Alternative joint-cost-allocation methods,...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Prob. 16.26ECh. 16 - Joint-cost allocation, sales value, physical...Ch. 16 - Joint-cost allocation: Sell immediately or process...Ch. 16 - Accounting for a main product and a byproduct....Ch. 16 - Joint costs and decision making. Jack Bibby is a...Ch. 16 - Joint costs and byproducts. (W. Crum adapted)...Ch. 16 - Methods of joint-cost allocation, ending...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Comparison of alternative joint-cost-allocation...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Joint-cost allocation. SW Flour Company buys 1...Ch. 16 - Further processing decision (continuation of...Ch. 16 - Joint-cost allocation with a byproduct. The...Ch. 16 - Byproduct-costing journal entries (continuation of...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Prob. 16.41PCh. 16 - Prob. 16.42PCh. 16 - Methods of joint-cost allocation, comprehensive....
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