Construction Accounting And Financial Management (4th Edition)
4th Edition
ISBN: 9780135232873
Author: Steven J. Peterson MBA PE
Publisher: PEARSON
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Textbook Question
Chapter 8, Problem 1DQ
What is the difference between an allowance and a reimbursement? How does this difference affect labor burden?
Expert Solution & Answer
To determine
Differentiate allowance and reimbursement and its effect on labor burden.
Explanation of Solution
The allowances are paid to cover the out of pocket expenses of the employee; whereas the reimbursements are made to cover the actual expense of the employee. The allowances are subject to employment and income tax; whereas reimbursements are non-taxable.
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Carichem Company produces sanitation products after processing specialized chemicals. The following relates to its activities: 1 Kilogram of chemicals purchased for $4000 and with an additional $2000 is processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a gram of Crystal can be sold for $2 and the Cleaning agent can be sold for $8 per litre. At an additional cost of $800, Carichem can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $4 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $600 and made into 200 packs of Softener that can be sold for $4 per pack. Required: 1. Allocate the joint cost to the Detergent and the Softener using the following: a. Sales value at split-off method b. NRV method 2. Should Carichem have processed each of the products further? What effect does the allocation method have on this decision?
Chapter 8 Solutions
Construction Accounting And Financial Management (4th Edition)
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