Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 19, Problem 3PB
Joint cost allocation
McKenzie’s Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process that costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000 bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off point. Each product is processed further after the split-off point, but the market value of a bottle of any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs of morning glory, snowflake sparkle, and sea breeze hand soap are 10.50, $0.55, and $0.60 per bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for $2.00, $2.20, and $2.40 per bottle, respectively.
Instructions
- 1. Using the net realizable value method, allocate the joint costs of production to each product.
- 2. Explain why McKenzie’s Soap Sensations, Inc., always chooses to process each variety of hand soap beyond the split-off point.
- 3. If demand for all products was the same, which product should McKenzie’s Soap Sensations, Inc., produce in the highest quantity?
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Joint cost allocation
Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of $250 per batch. At the split-off point, one batch produces 80, 40, and 25 bottles of hand, body, and foot lotion, respectively. After the split-off point, hand lotion is sold immediately for $2.50 per bottle. Body lotion is processed further at an additional cost of $0.25 per bottle and then sold for $5.75 per bottle. Foot lotion is processed further at an additional cost of $0.85 per bottle and then sold for $4.00 per bottle. Assume that body and foot lotion could be sold at the split-off point for $3.00 and $3.20 per bottle, respectively.
Using the market value at split-off method, allocate the joint costs of production to each product. Round your answers to two decimal places.
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Joint Cost Allocation-Physical Units Method
Medieval Blacksmith Co. produces two types of decorative swords, a broadsword and a longsword. The swords are made through a joint production
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$
P
Alvarez Company makes three joint products, products A, B, and C. For each batch, the materials cost is $22,500, direct labor cost is
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Required:
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Chapter 19 Solutions
Financial And Managerial Accounting
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