Chapter 22, Problem 20E

1.

To determine

To compute: Allocation of cost sold tails and flakes.

Explanation of Solution

Sold items:

Tails:

Given,
Total value of tails sold is $23,016.
Total values of tails and flakes are $33,600.
Total cost is $12,600.

Formula to allocate cost to the sold tails,

$\text{Cost allocated to sold tails}=\frac{\text{Total value of tails sold}}{\text{Total value of tails and flakes}}\times \text{Total cost}$

Substitute $23,016 for total value of sold tails, $33,600 for total value of tails and flakes and $12,600 for total cost in the above equation.

$\begin{array}{c}\text{Cost allocated to sold tails}=\frac{\$23,016}{\$33,600}\times \$12,600\\ =\$8,631\end{array}$

Hence, cost allocated to sold tails is $8,631.

Working notes:

Calculation for total cost,

$\begin{array}{c}\text{Total cost}=\text{Purchase cost}+\text{Labor cost}\\ =\$10,800+\$1,800\\ =\$12,600\end{array}$

Calculation for purchase cost,

$\begin{array}{c}\text{Purchase cost}=\text{Number of pounds lobster purchase}\times \text{Rate per pound}\\ =2,400\times \$4.50\\ =\$10,800\end{array}$

Calculation for total value of tails sold,

$\begin{array}{c}\text{Total value of tails sold}=\text{Total tails sold}\times \text{Rate of each tale}\\ =1,096\times \$21\\ =\$23,016\end{array}$

Calculation of total tails processed,

$\begin{array}{c}\text{Total}\text{tails}\text{processed}=\text{Total weight of lobster}\times \text{Tails percentage of total weight}\\ =2,400\times \frac{52}{100}\\ =1,248\end{array}$

Calculation of total value of tails,

$\begin{array}{c}\text{Total}\text{value of tails}=\text{Total tails processed}\times \text{Value of each pound}\\ =1,248\times \$21\\ =\$26,208\end{array}$

Calculation of total flakes processed,

$\begin{array}{c}\text{Total}\text{flakes}\text{processed}=\text{Total weight of lobster}\times \text{Flakes percentage of total weight}\\ =2,400\times \frac{22}{100}\\ =528\end{array}$

Calculation of total value of flakes,

$\begin{array}{c}\text{Total}\text{value of flakes}=\text{Total flakes processed}\times \text{Value of each pound}\\ =528\times \$14\\ =\$7,392\end{array}$

Calculation of total value of tails and flakes,

$\begin{array}{c}\text{Total}\text{value of tails and flakes}=\text{Total tails processed}+\text{Total flakes processed}\\ =\$26,208+\$7,392\\ =\$33,600\end{array}$

Flakes:

Given,
Total value of flakes sold is $4,536.
Total values of tails and flakes are $33,600.
Total cost is $12,600.

Formula to allocate cost to the sold flakes,

$\text{Cost allocated to sold flakes}=\frac{\text{Total value of flakes sold}}{\text{Total value of tails and flakes}}\times \text{Total cost}$

Substitute, $4.536 for total value of sold flakes, $33,600 for total value of tails and flakes and $12,600 for total cost in the above equation.

$\begin{array}{c}\text{Cost allocated to sold flakes}=\frac{\$4,536}{\$33,600}\times \$12,600\\ =\$1,701\end{array}$

Hence, cost allocated to sold tails is $1,701.

Working notes:

Calculation for total value of flakes sold,

$\begin{array}{c}\text{Total value of flakes sold}=\text{Total flakes sold}\times \text{Rate of each flakes}\\ =324\times \$14\\ =\$4,536\end{array}$

2.

To determine

To compute: Allocation of cost ending inventory of tails and flakes.

Explanation of Solution

Ending inventory:

Tails:

Given,
Total value of ending inventory of tails is $3,092.
Total values of tails and flakes are $33,600.
Total cost is $12,600.

Formula to allocate cost to ending inventory of tails,

$\text{Cost allocated}=\frac{\text{Total value of ending inventory of tails}}{\text{Total value of tails and flakes}}\times \text{Total cost}$

Substitute $3,092 for total value of ending inventory of tails, $33,600 for total value of tails and flakes and $12,600 for total cost in the above equation.

$\begin{array}{c}\text{Cost allocated}=\frac{\$3,192}{\$33,600}\times \$12,600\\ =\$1,197\end{array}$

Hence, cost allocated to ending inventory of tails is $$1,197.

Working notes:

Calculation for total value of ending inventory,

$\begin{array}{c}\text{Total value of ending inventory}=\text{Weight of ending inventory}\times \text{Value of each pound}\\ =152\times \$21\\ =\$3,092\end{array}$

Calculation for weight of ending inventory,

$\begin{array}{c}\text{Weight of ending inventory}=\text{Total tails processed}-\text{Total tails sold}\\ =1,248-1,096\\ =152\end{array}$

Flakes:

Given,
Total value of ending inventory of flakes is $2,856.
Total values of tails and flakes are $33,600.
Total cost is $12,600.

Formula to allocate cost to ending inventory of flakes,

$\text{Cost allocated}=\frac{\text{Total value of ending inventory of flakes}}{\text{Total value of tails and flakes}}\times \text{Total cost}$

Substitute $2,856 for total value of ending inventory of flakes, $33,600 for total value of tails and flakes and $12,600 for total cost in the above equation.

$\begin{array}{c}\text{Cost allocated}=\frac{\$2,856}{\$33,600}\times \$12,600\\ =\$1,071\end{array}$

Hence, cost allocated to ending inventory of flakes is $1,701.

Working note:

Calculation for total value of ending inventory,

$\begin{array}{c}\text{Total value of ending inventory}=\left(\begin{array}{l}\text{Weight of ending inventory}\\ \times \text{Value of each pound}\end{array}\right)\\ =204\times \$14\\ =\$2,856\end{array}$