Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 16, Problem 16.37P
Methods of joint-cost allocation, comprehensive. Kardash Cosmetics purchases flowers in bulk and processes them into perfume. From a certain mix of petals, the firm uses Process A to generate Seduction, its high-grade perfume, as well as a certain residue. The residue is then further treated, using Process B, to yield Romance, a medium-grade perfume. An ounce of residue typically yields an ounce of Romance.
In July, the company used 25,000 pounds of petals. Costs involved in Process A, i.e., reducing the petals to Seduction and the residue, were:
The additional costs of producing Romance in Process B were:
During July, Process A yielded 7,000 ounces of Seduction and 49,000 ounces of residue. From this, 5,000 ounces of Seduction were packaged and sold for $109.50 an ounce. Also, 28,000 ounces of Romance were processed in Process B and then packaged and sold for $31.50 an ounce. The other 21,000 ounces remained as residue. Packaging costs incurred were $137,500 for Seduction and $196,000 for Romance. The firm has no beginning inventory on July 1.
If it so desired the firm could have sold unpackaged Seduction for $56 an ounce and the residue from Process A for $24 an ounce.
- 1. What is the joint cost of the firm to be allocated to Seduction and Romance?
Required
- 1. Under the physical measure method, how would the joint costs be allocated to Seduction and Romance?
- 2. Under the sales value at splitoff method, what portion of the joint costs would be allocated to Seduction and Romance, respectively?
- 3. What is the estimated net realizable value per ounce of Seduction and Romance?
- 4. Under the net realizable value method, what portion of the joint costs would be allocated to Seduction and Romance, respectively?
- 5. What is the gross margin percentage for the firm as a whole?
- 6. Allocate the joint costs to Seduction and Romance under the constant gross-margin percentage NRV method.
- 7. If you were the manager of Kardash Cosmetics, would you continue to process the petal residue into Romance perfume? Explain your answer.
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Splish is a producer of perfume, sourcing materials from all over the world as it creates beautiful scents. In November, Splish was producing perfume that would be bottled into 1.2 ounce sizes. The manufacturing department reports the following information related to production of liquid perfume this month.
Step 2: Determine physical status of units and convert into equivalent units
Physical Units
Equivalent Units
DM
Conversion Costs
% Added
Equiv. Units
% Added
Equiv. Units
Units completed this period
380
100%
380
100%
380
Units in ending WIP Inventory
40
100%
40
40%
16
Total units accounted for
420
Total equivalent units of work done
420
396
Step 3: Account for costs
Total Costs
DM
Conversion Costs
Costs in beginning WIP Inventory (from last period)
$2,065
$1,400
$665
Costs added to WIP Inventory this period
10,247…
Splish is a producer of perfume, sourcing materials from all over the world as it creates beautiful scents. In November, Splish was producing perfume that would be bottled into 1.2 ounce sizes. The manufacturing department reports the following information related to production of liquid perfume this month.
Step 2: Determine physical status of units and convert into equivalent units
Physical Units
Equivalent Units
DM
Conversion Costs
% Added
Equiv. Units
% Added
Equiv. Units
Units completed this period
380
100%
380
100%
380
Units in ending WIP Inventory
40
100%
40
40%
16
Total units accounted for
420
Total equivalent units of work done
420
396
Step 3: Account for costs
Total Costs
DM
Conversion Costs
Costs in beginning WIP Inventory (from last period)
$2,065
$1,400
$665
Costs added to WIP Inventory this period
10,247…
Candy Kane Cosmetics (CKC) produces Leslie -Perfume, which requires chemicals and labor. Two production processes are available. Process 1 -transforms one unit of labor and two units of chemicals into three ounces of perfume. Process two transforms two units of labor and three units of chemicals into five ounces of -perfume. It costs CKC $3 to purchase a unit of labor and $2 to purchase a unit of chemicals. Each year up to 20,000 units of labor and 35,000 units of chemicals can be purchased. In the -absence of advertising, CKC believes it can sell 1000 ounces of perfume. To-stimulate demand for Leslie, CKC can hire the beautiful model Jenny -Nelson. Jenny is paid $100 per hour. Each hour Jenny works for the company is estimated to increase the -demand for Leslie Perfume by 200ounces. Each ounce of Leslie Perfume sells for $5. Determine how CKC can maximize its profit.
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....
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