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1.
Ascertain the joint cost to be allocated to the products under the relative sales value method.
1.
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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.
Ascertain the joint cost to be allocated to the products under the physical measure method.
2.
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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.
Ascertain the joint cost to be allocated to the products under the net realizable value method.
3.
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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.
Ascertain the joint cost to be allocated to the products under the physical measure method.
4.
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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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Chapter 7 Solutions
Cost Management
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
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