Chapter 24, Problem 22E

To determine

To Calculate:

Requirement 2:

Allocated cost of ending inventory

Answer to Problem 22E

Solution:

Allocated cost of ending inventory of Lobster Tail = $1197

Allocated cost of ending inventory of Lobster Flakes = $1071

Explanation of Solution

Ending Inventory = Purchased − Sold

  $\begin{array}{l}EndingInventoryofLobsterTail=\left(52x24\right)–1096=152pounds\hfill \\ \hfill \\ EndingInventoryofLobsterFlakes=\left(22x24\right)–324=204pounds\hfill \end{array}$

Cost of ending inventory = Ending Inventory x Cost per pound

  $\begin{array}{l}CostofEndingInventoryofLobsterTail=152x7.875=\$1197\hfill \\ \hfill \\ CostofEndingInventoryofLobsterFlakes=204x5.25=\$1071\hfill \end{array}$

Total or Joint Cost

  $\begin{array}{l}TotalCost =Purchasingcost+ProcessingCost\hfill \\ =\left(2400x4.50\right)+1800\hfill \\ =\$12,600\hfill \end{array}$

Market Value

  $\begin{array}{l}MVoflobstertail=52x24x21=\$26208\hfill \\ \hfill \\ MVoflobsterflakes=22x24x14=\$7392\hfill \\ \hfill \\ TotalMarketValue=26208+7392=\$33600\hfill \end{array}$

Percentage of Market Value

  $\begin{array}{l}Lobstertail=26208/33600=78\%\hfill \\ \hfill \\ Lobsterflakes=7392/33600=22\%\hfill \end{array}$

Allocation of Joint Cost

  $\begin{array}{l}Lobstertail=78\%of12600=\$9828\hfill \\ \hfill \\ Lobsterflakes=22\%of12600=\$2772\hfill \end{array}$

Cost per Pound

  $\begin{array}{l}LobsterTail=9828/1248=\$7.875\hfill \\ \hfill \\ LobsterFlakes=2772/528=\$5.25\hfill \end{array}$