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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Textbook Question
Chapter 16, Problem 16.34P
Comparison of alternative joint-cost-allocation methods, further-processing decision, chocolate products. The Rich and Creamy Edibles Factory manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate products: chocolate-powder liquor base and milk-chocolate liquor base. These two intermediate products become separately identifiable at a single splitoff point. Every 600 pounds of cocoa beans yields 20 gallons of chocolate-powder liquor base and 60 gallons of milk-chocolate liquor base.
The chocolate-powder liquor base is further processed into chocolate powder. Every 20 gallons of chocolate-powder liquor base yield 680 pounds of chocolate powder. The milk-chocolate liquor base is further processed into milk chocolate. Every 60 gallons of milk-chocolate liquor base yield 1,100 pounds of milk chocolate.
Production and sales data for August 2017 are as follows (assume no beginning inventory):
- Cocoa beans processed, 27,600 pounds
- Costs of processing cocoa beans to splitoff point (including purchase of beans), $70,000
Rich and Creamy Edibles Factory fully processes both of its intermediate products into chocolate powder or milk chocolate. There is an active market for these intermediate products. In August 2017, Rich and Creamy Edibles Factory could have sold the chocolate-powder liquor base for $21 a gallon and the milk-chocolate liquor base for $28 a gallon.
- 1. Calculate how the joint costs of $70,000 would be allocated between chocolate powder and milk chocolate under the following methods:
Required
- a. Sales value at splitoff
- b. Physical measure (gallons)
- c. NRV
- d. Constant gross-margin percentage NRV
- 2. What are the gross-margin percentages of chocolate powder and milk chocolate under each of the methods in requirement 1?
- 3. Could Rich and Creamy Edibles Factory have increased its operating income by a change in its decision to fully process both of its intermediate products? Show your computations.
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Kelp Company produces three joint products from seaweed. At the split-off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split-off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows.
Sales Value and AdditionalCosts If Processed Further
Product
PoundsProduced
Sales Value at Split-Off
Final SalesValue
AdditionalCost
Sea Tea
9,000
$
60,000
$
90,000
$
35,000
Sea Paste
5,300
86,900
160,000
50,000
Sea Powder
2,000
70,000
85,000
14,000
Required:
a-1. Compute the incremental benefit (cost) of further processing to these products.
a-2. Which products should Kelp process beyond the split-off point?
b. What is the selling price per pound of Sea Paste at the split-off point at which the company is indifferent?
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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