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 16.43P
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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Perfume manufacturer 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 uses 25,000 pounds of petals. Costs involved in Process A, i,e., reducing the petals to Seduction and the residue, were:
Direct Materials = $440,000
Direct Labour = $220,000
Overhead Costs = $110,000
The additional costs of producing Romance in Process B were:
Direct Materials = $22,000
Direct Labour = $50,000
Overhead Costs = $40,000
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.…
If you were the manager of Kardash Cosmetics, would you continue to process the petal residue into Romance perfume? Explain your answer.
North 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…
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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