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Carleigh, Inc., is a pork processor. Its plants, located in the Midwest, produce several products from a common process: sirloin roasts, chops, spare ribs, and the residual. The roasts, chops, and spare ribs are packaged, branded, and sold to supermarkets. The residual consists of organ meats and leftover pieces that are sold to sausage and hot dog processors. The joint costs for a typical week are as follows:
The revenues from each product are as follows: sirloin roasts, $68,000; chops, $71,000; spare ribs, $33,000; and residual, $9,800.
Carleigh’s management has learned that certain organ meats are a prized delicacy in Asia. They are considering separating those from the residual and selling them abroad for $52,000. This would bring the value of the residual down to $2,650. In addition, the organ meats would need to be packaged and then air freighted to Asia. Further
Required:
- 1. What is the gross profit earned by the original mix of products for one week?
- 2. Should the company separate the organ meats for shipment overseas or continue to sell them at split-off? What is the effect of the decision on weekly gross profit?
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Chapter 17 Solutions
Cornerstones of Cost Management (Cornerstones Series)
- Carleigh, Inc., is a pork processor. Its plants, located in the Midwest, produce several products from a common process: sirloin roasts, chops, spare ribs, and the residual. The roasts, chops, and spare ribs are packaged, branded, and sold to supermarkets. The residual consists of organ meats and leftover pieces that are sold to sausage and hot dog processors. The joint costs for a typical week are as follows: Direct materials $83,000 Direct labor 27,400 Overhead 19,000 The revenues from each product are as follows: sirloin roasts, $67,000; chops, $79,000; spare ribs, $36,000; and residual, $8,800. Carleigh’s management has learned that certain organ meats are a prized delicacy in Asia. They are considering separating those from the residual and selling them abroad for $52,600. This would bring the value of the residual down to $2,900. In addition, the organ meats would need to be packaged and then air freighted to Asia. Further processing cost per week is estimated to be…arrow_forwardThe Compressor Division and the Fabrication Division of Plash Company, which exclusively produces one type of washing machine, respectively, are its two divisions. For the Fabrication Division, which completes the washing machine and sells it to retailers, the Compressor Division makes compressors. The Fabrication Division buys compressors from the Compressor Division. The Fabrication Division will spend $40.00 on a compressor, which is the market price. (Skip updates to the inventory.) It is expected that the fixed costs for the Compressor Division remain constant for orders between 5,000 and 10,000 units. The Fabrication Division's fixed expenses are estimated to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials $15.00 Direct labor $7.25 Variable overhead $3.00 Division fixed costs $7.50 Fabrication's costs per completed air conditioner are: Direct materials $150.00 Direct labor $62.50 Variable overhead $20.00 Division fixed costs $7.50 Assume…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_forward
- Otto Inc. specializes in chicken farming. Chickens are raised, packaged, and sold mostly to grocery chains. Chickens are accounted for in batches of 50,000. At the end of each growing period, the chickens are separated and sold by grades. Grades AA and A are sold to large grocery chains, and B and C are sold to other buyers. For costing purposes, Otto treats each batch of chicks as a joint product. The cost data for a batch of 50,000 chicks follow: Total joint costs for the batch were 125,000. Required: Compute the cost allocations for each product, using the sales value at split-off method. (Round sales value percentages to five decimal places.)arrow_forwarddisc uses activity-based costing. two of discs production activinarrow_forwardDr M's Chicken soup company produces intermediate products X, Y, and Z from a joint production process involving chicken, vegetables and broth. Each product may be sold at the split-off point or processed further. Joint production costs of $75,000 per year are allocated to the products based on the relative number of units produced. Data for M's Chicken soup company for last year follow: The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. The additional processing costs and sales value after further processing for each product (on an annual basis) are: Further Sales Value Sales Value at Processing Split-Off $ 300,000 $ 175,000 $ 295,000 After Further Costs $ 125,000 $ 210,000 $ 135,000 Processing $ 534,000 $ 450,000 $ 360,000 Product X Product Y Product Z Required: a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? b. What is financial advantage (disadvantage) of…arrow_forward
- Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $59 to buy from farmers and $18 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $29 or processed further for $27 to make the end product industrial fiber that is sold for $75. The beet juice can be sold as is for $50 or processed further for $31 to make the end product refined sugar that is sold for $75. What is the financial advantage (disadvantage) for the company from processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all? Multiple Choice O $15 per batch $16 per batch ($4) per batch ($135) per batcharrow_forwardClassify each of the customer-level operating costs as a customer output unit–level, customer batchlevel, or customer-sustaining cost.arrow_forwardBoney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $65 to buy from farmers and $24 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $35 or processed further for $39 to make the end product industrial fiber that is sold for $87. The beet juice can be sold as is for $56 or processed further for $43 to make the end product refined sugar that is sold for $87. What is the financial advantage (disadvantage) for the company from processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all?arrow_forward
- Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity- based costing methods and identified four activities. Data on these activities follow. Activity Processing order Loading truck Delivering merchandise Processing invoice Total overhead Order value Number of orders Number of items Number of invoices Cost Driver Number of orders Number of items Number of orders Number of invoices Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow. City Diner Le Chien Chaud $75,000 $90,000 110 1,500 150 Required A Cost Driver Volume 52 600 12 Cost $ 75,000 150,000 90,000 72,000 $387,000 Required B City Diner Le Chien Chaud Driver Volume 5,000 orders 100,000 items Required: a. What would the delivery charge for each…arrow_forwardAZChen Company manufactures one particular type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $40.00. (Ignore changes in inventory.) The fixed costs for the Compressor and Fabrication Divisions are assumed to be the same over the range of 1,000 - 5,000 units. Compressor's costs per compressor are: Direct materials $15 Direct labour $7.30 Variable overhead $2.69 Division fixed costs $7.48 Fabrication's costs per completed washing machine are: Direct materials $140.00 (excluding the transfer price of the compressor) Direct labour $57.50 Variable overhead $23.00 Division fixed costs $8.00 Assume the transfer price for a compressor is 149% of total costs…arrow_forwardOat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). What is Oat Treats' relevant cost? What does Simmons Cereal's offer cost? If Oat Treats accepts the offer, what will the effect on profit be? Incremental dollar amount = _________ Increase or Decrease? . ___________ Please note: Your answer is either "Increase" or "Decrease" - capital first letters and no quotes.arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
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