15th Edition

ISBN: 9781337912020

Author: Carl Warren, Ph.d. Cma William B. Tayler

Publisher: South-Western College Pub

Concept explainers

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing …

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In compari…

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Textbook Question

Chapter 5, Problem 3PA

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.

Instructions

1. Using the market value at split-off method, allocate the joint costs of production to each product.
2. Based on the information provided and your answer to part (1), should Lovely Lotion Inc. continue processing body and foot lotion after the split-off point?
3. Allocate the joint costs of production to each product using the net realizable value method.

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Chapter 5, Problem 2PA

Chapter 5, Problem 4PA

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Chapter 5 Solutions

Managerial Accounting

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Solution Summary: The author explains the cost allocation process of allocating the costs associated with the production of the products mainly indirectly.

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