Cost Management
8th Edition
ISBN: 9781259917028
Author: BLOCHER, Edward
Publisher: Mcgraw-hill Education,
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Question
Chapter 7, Problem 42P
1.
To determine
Ascertain the joint cost to be allocated to the products under the relative sales value method.
1.
Expert Solution
Explanation of Solution
Compute the sales value at split off:
| Particulars | Smooth | Silken | Total |
| Production | 80,000 | 120,000 | |
| (×) Sales Price | $2.40 | $3.90 | |
| Sales value of production | $432,000 | $468,000 | $900,000 |
Table (1)
Compute the percentage of net realizable value:
Product Smooth:
Silken:
Allocate the joint costs:
| Particulars | Smooth | Silken | Total |
| Allocation percentage | 48% | 52% | |
| Allocated joint costs | $201,600 | $218,400 | $420,000 |
Table (2)
2.
To determine
Ascertain the joint cost to be allocated to the products under the physical measure method.
2.
Expert Solution
Explanation of Solution
Compute the cost to be allocated under physical measure method:
| Particulars | Smooth | Silken | Total |
| Production | 180,000 | 120,000 | 300,000 |
| Allocation percentage | 60% | 40% | |
| Allocated joint costs | $252,000 | $168,000 | $420,000 |
Table (3)
Compute the percentage of net realizable value:
Product Smooth:
Silken:
3.
To determine
Ascertain the joint cost to be allocated to the products under the net realizable value method.
3.
Expert Solution
Explanation of Solution
Compute the net realizable value:
| Particulars | Smooth | Silken | Total |
| Production (A) | 180,000 | 120,000 | |
| (×) Sales Price (B) | $2.40 | $3.90 | |
| Sales value of production (A×B) | $432,000 | $468,000 | $900,000 |
| Individual separable cost (C) | $1.40 | $0.90 | |
| Less: Separable costs (A×C) | $252,000 | $108,000 | $360,000 |
| Net Realizable Value (NRV) | $180,000 | $360,000 | $540,000 |
Table (4)
Compute the percentage of net realizable value:
Product Smooth:
Silken:
Allocate the joint costs:
| Particulars | Smooth | Silken | Total |
| Allocation percentage | 33.33% | 66.67% | |
| Allocated joint costs | $140,000 | $280,000 | $420,000 |
Table (5)
4.
To determine
Ascertain the joint cost to be allocated to the products under the physical measure method.
4.
Expert Solution
Explanation of Solution
Compute the cost to be allocated under physical measure method:
| Particulars | Smooth | Silken | Total |
| Production | 180,000 | 120,000 | 300,000 |
| Allocation percentage | 60% | 40% | |
| Allocated joint costs | $252,000 | $168,000 | $420,000 |
Table (6)
Compute the percentage of net realizable value:
Product Smooth:
Silken:
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Activity Based Costing - practice problem
Fontillas Instrument, Inc. manufactures two products: missile range instruments and
space pressure gauges. During April, 50 range instruments and 300 pressure gauges
were produced, and overhead costs of $89,500 were estimated. An analysis of
estimated overhead costs reveals the following activities.
Activities
1. Materials handling
2. Machine setups
Cost Drivers
Number of requisitions
Number of setups
Total cost
$35,000
27,500
3. Quality inspections
Number of inspections
27,000
$89.500
The cost driver volume for each product was as follows:
Cost Drivers
Instruments
Gauge
Total
Number of requisitions
400
600
1,000
Number of setups
200
300
500
Number of inspections
200
400
600
Insructions
(a) Determine the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for April to the two products using
activity-based costing.
Bodhi Company has three cost pools and two doggie products (leashes and collars). The activity cost pool
of ordering has the cost drive of purchase orders. The activity cost pool of assembly has a cost driver of
parts. The activity cost pool of supervising has the cost driver of labor hours. The accumulated data
relative to those cost drivers is as follows:
Expected Use of
Estimated
Cost Drivers by Product
Cost Drivers
Overhead
Leashes
Collars
Purchase orders
$260,000
70,000
60,000
Parts
400,000
300,000
500,000
Labor hours
300,000
15,000
10,000
$960,000
Instructions: (a) Compute the activity-based overhead rates. (b) Compute the costs assigned to leashes
and collars for each activity cost pool. (c) Compute the total costs assigned to each product.
Chapter 7 Solutions
Cost Management
Ch. 7 - Prob. 1QCh. 7 - Explain the difference between joint products and...Ch. 7 - Prob. 3QCh. 7 - What are the three methods of departmental cost...Ch. 7 - Prob. 5QCh. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - What are the limitations of joint product and...Ch. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 -
What is the amount of service department cost...Ch. 7 - Prob. 12BECh. 7 - Prob. 13BECh. 7 - Prob. 14BECh. 7 - Prob. 15BECh. 7 - Prob. 16BECh. 7 - Prob. 17BECh. 7 - Prob. 18BECh. 7 - Prob. 19BECh. 7 - Brief Exercises 7-17 through 7-20 require the...Ch. 7 - Prob. 21ECh. 7 - Prob. 22ECh. 7 - Prob. 23ECh. 7 - Prob. 24ECh. 7 - Great Ape Glassworks manufactures glass used for...Ch. 7 - Cost allocation is often the centerpiece of...Ch. 7 - Prob. 27ECh. 7 - Prob. 28ECh. 7 - Robinson Products Company has two service...Ch. 7 - Donation of blood through the American Red Cross...Ch. 7 - Tango Company produces joint products M, N, and T...Ch. 7 - Arkansas Corporation manufactures liquid chemicals...Ch. 7 - Webster Company produces 25,000 units of product...Ch. 7 - Marin Company produces two software products...Ch. 7 - Logan Products has two production...Ch. 7 - McKeoun Enterprises is a large machine tool...Ch. 7 - Barfield Corporation prepares business plans and...Ch. 7 - Solexx Corporation allocates its service...Ch. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Prob. 47PCh. 7 - Prob. 48PCh. 7 - Prob. 49PCh. 7 - Prob. 50P
Knowledge Booster
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