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.
Learn your wayIncludes step-by-step video
Chapter 16 Solutions
Cost Accounting (15th Edition)
Additional Business Textbook Solutions
Principles of Accounting Volume 2
Principles of Accounting Volume 1
Financial Accounting, Student Value Edition (4th Edition)
Managerial Accounting (5th Edition)
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
Horngren's Accounting (12th Edition)
- Under the physical measure method, how would the joint costs be allocated to Seduction and Romance?arrow_forwardTaylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio and Maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and Maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year, Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2,000 units of Maslimpio. The detail of each products unit contribution margin is as follows: Taylor Company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6,000 quarts it planned to use in the coming years production. There is no other source of the material. Required: 1. Compute the total contribution margin that the company would earn if it could import the 6,000 quarts of the material. 2. Determine the optimal usage of the companys inventory of 6,000 quarts of the material. Compute the total contribution margin for the product mix that you recommend. 3. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year. a. Formulate the linear programming problem faced by Taylor Company. To do so, you must derive mathematical expressions for the objective function and for the materials and labor constraints. b. Solve the linear programming problem using the graphical approach. c. Compute the total contribution margin produced by the optimal mix.arrow_forwardChypre, Inc., produces a cologne mist using a solvent mix (water and pure alcohol) and aromatic compounds (the scent base) that it sells to other companies for bottling and sale to consumers. Chypre developed the following standard cost sheet: On May 2, Chypre produced a batch of 1,000 gallons with the following actual results: Required: 1. Calculate the yield ratio. 2. Calculate the standard cost per unit of the yield. (Round to the nearest cent.) 3. Calculate the direct materials yield variance. (Round to the nearest cent.) 4. Calculate the direct materials mix variance. (Round to the nearest cent.)arrow_forward
- Strawberry Sweet Company makes a variety of jams and jellies. During June, 55,000 gallons of strawberry mash was processed at a joint cost of $40,000. This produced 42,000 gallons of preserve-grade mix and 4,000 gallons of Strawberry juice for jelly. The juice could be processed further into energy drinks, and the preserve mix could be processed further into ice cream flavoring. Information on these items is shown: A. Assume that the joint cost is allocated to the products based on the physical quantity of output of each product. How much joint cost should be assigned to each product? B. How much joint cost should be assigned to each product if the relative sales value allocation method is used? C. Which products should be processed further?arrow_forwardIf you were the manager of Kardash Cosmetics, would you continue to process the petal residue into Romance perfume? Explain your answer.arrow_forwardNorth Co manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information concerning the purchase and use of Echol follows: Purchase of Echol. Echol is purchased in 20-quart containers at a cost of $50 per container. A discount of 4% is offered by the supplier for payment within 10 days, and North Co takes all discounts. Shipping costs, which North Co must pay, amount to $400 for an average shipment of 100 20-quart containers of Echol. Use of Echol. The bill of materials calls for 18.0 quarts of Echol per bottle of cleaning solvent. About 10% of all Echol used is lost through spillage or evaporation (the 18.0 quarts above is the actual content per bottle). In addition, statistical analysis has shown that every 51st bottle is rejected at final inspection because of contamination. Please make sure your final answer(s) are accurate to 2 decimal places. a) Compute the standard purchase price for one quart of Echol. Standard purchase…arrow_forward
- Rosehut Olive Oil Company makes two grades of olive oil: standard and extra virgin. Rosehut has identified two activity pools, the related costs per pool, the cost driver for each pool, and the expected usage for each pool. Total Activity Cost Activity Washing, Pressing & Filtering (WPF) Bottling $ 1,550,150 $ 453,000 Additional information about each grade of olive oil is as follows: Direct Materials Costs Grade Standard Extra Virgin Sales Revenue $ 5,105,000 $ 2,150,000 Required 1 $ 900,000 $ 600,000 Required: 1. Calculate the activity rate for each activity pool. 2. Using the activity rates, determine the total amount of overhead assigned to each product. 3. Determine total manufacturing cost for each product. 4. Calculate the gross profit for each product. Required 2 Required 3 Cost Driver Washing, Pressing, and Filtering hours Number of bottles. Complete this question by entering your answers in the tabs below. Direct Labor Costs $ 375,000 $ 150,000 Required 4 Standard 45,200…arrow_forwardSnapware Systems produces commercial strength cleansing supplies. Two of its main products are window cleaner that uses ammonia, and floor cleaner that uses bleach. Information for the most recent period follows: Product Names Window Cleaner (ammonia) Floor Cleaner (bleach) Direct materials information: Standard ounces per unit 16 oz. 24 oz. Standard price per ounce $0.75 ? Actual quantity used per unit 20 oz. 22 oz. Actual price paid for material $1.00 $0.90 Actual quantity purchased and used 1,500 oz. 2,800 oz.. Price variance ? $300 U Quantity variance $1,500 U ? Total direct materials variance ? $678 F Number of units produced 500 600 What is the standard price for bleach? Select one: a. $0.88/oz. b. $1.09/oz. c. $1.14/oz. d. $0.79/oz. e. $0.92/oz.arrow_forwardABC Chemical Company manufactures industrial chemicals. The company plans to introduce a new chemical solution and needs to develop a standard product cost. The new chemical solution is made by combining a chemical compound (nyclyn) with a solution (salex), heating the mixture to boiling point, adding a second compound (protet), and bottling the resulting solution in 15-litre containers. The initial mix, which is 12 litres in volume, consists of 14 kilograms of nyclyn and 11.6 litres of salex. A 1-litre reduction in volume occurs during the boiling process. The solution is cooled slightly before 8 kilograms of protet are added. The protet evaporates, so it does not affect the total liquid volume. The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows: Nyclyn $4.90 per kilogram Salex $5.60 per litre Protet $6.80 per kilogram a. 102.36 b. None of the answers given c. 98.36 d. 93.36arrow_forward
- Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a rawmaterial called Echol. Information concerning the purchase and use of Echol follows:Purchase of Echol Echol is purchased in 15-gallon containers at a cost of $115 per container. A discount of2% is offered by the supplier for payment within 10 days, and Martin Company takes all discounts. Shipping costs, which Martin Company must pay, amount to $130 for an average shipment of 100 15-galloncontainers of Echol.Use of Echol The bill of materials calls for 7.6 quarts of Echol per bottle of cleaning solvent. (Each galloncontains four quarts.) About 5% of all Echol used is lost through spillage or evaporation (the 7.6 quartsabove is the actual content per bottle). In addition, statistical analysis has shown that every 41st bottle isrejected at final inspection because of contamination.Required:1. Compute the standard purchase price for one quart of Echol.2. Compute the standard quantity of…arrow_forwardTreaty Treat, Inc., purchases soybeans and processes them into the following three types of products: dog biscuits, cat food, and chicken feed. These products are the result of a joint process. In a typical month, there are total joint costs of $191,000. The dog biscuits and chicken feed are sold after being pressed into various shapes without further processing by TreatyTreat. (i.e. the fully- processed sales price is the same as the sales price at the point of split-off.) The cat food must be further mixed with vitamins. If the cat food spoils during the vitamin-adding process, the product can still be sold for fertilizer at $2.70 per unit. (Hint, this would be the sales value of the cat food at the split-off point.) The additional processing of cat food costs TreatyTreat $13,700 per month. Product yield and average sales value on a per-unit basis from the joint processes are as follows: Monthly Fully Processed Sales Price $9 Product Dog Biscuits Cat Food Chicken Feed Output 53,000…arrow_forwardCandy 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.arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College