a.
Calculate the net realizable value of Beta-1 for the year ended November 30.
a.
Answer to Problem 68P
The net realizable value for Beta-1 is $375,000.
Explanation of Solution
Net realizable value method:
Net realizable value method is used to allocate the cost in the proposition of their net realizable market value at the split-off point. If the product can be sold at the split-off point then the selling price of that product at a split-off point is used as the base for the calculation of cost allocation.
Calculate the net realizable value for Beta-1:
Thus, the net realizable value for Beta-1 is $375,000.
Working note 1:
Calculate the unit produced for Beta-1:
Working note 2:
Calculate the price per unit for Beta-1:
There is no further processing for the Beta-1, so the sales value at the split-point should be used.
b.
Calculate the joint costs for the year ended November 30 to be allocated.
b.
Answer to Problem 68P
The joint cost for the year ended November 30 is $1,050,000.
Explanation of Solution
Cost allocation:
Cost allocation is the process of distributing the common cost of the production and service rendered to the various departments of the business. It is used to calculate the actual cost attributed to a specific department.
Calculate the joint cost for the year ended November 30:
Particulars | Amount |
Cost of alpha-11 | $720,000 |
Direct labor | $180,000 |
Manufacturing | $150,000 |
Total joint costs | $1,050,000 |
Table: (1)
The joint cost will consider all the costs to the split-off point.
Thus, the joint cost for the year ended November 30 is $1,050,000.
c.
Calculate the cost of Beta-2 sold for the year ended November 30.
c.
Answer to Problem 68P
The total cost of the Beta-2 is $705,000.
Explanation of Solution
Cost allocation:
Cost allocation is the process of distributing the common cost of the production and service rendered to the various departments of the business. It is used to calculate the actual cost attributed to a specific department.
Calculate the cost allocation of Beta-2:
Particulars | Amount |
Allocation to Beta-2(3) | $210,000 |
Direct labor | $337,500 |
Manufacturing overhead | $157,500 |
Total cost of Beta-2 | $705,000 |
Table: (2)
Thus, the total cost of the Beta-2 is $705,000.
Working note 3:
Calculate the joint cost allocation to Beta-2:
Working note 4:
Calculate the total net realized value of the company:
Particulars | Amount |
Net realizable value of Beta-1 | $375,000 |
Net realizable value of Beta-2 | $225,000(5) |
Net realizable value of Beta-3 | $525,000(6) |
Total net realized value | $1,125,000 |
Table: (3)
Working note 5:
Calculate the net realizable value of Beta-2:
Particulars | Amount |
Sales value | $720,000 |
Less: direct labor | $337,500 |
Less: manufacturing overhead | $157,500 |
Net realized value | $225,000 |
Table: (4)
Working note 6:
Calculate the net realized value of Beta-3:
Particulars | Amount |
Sales value | $1,417,500(7) |
Less: direct labor | $487,500 |
Less: manufacturing overhead | $405,000 |
Net realized value | $525,000 |
Table: (5)
Working note 7:
Calculate the sales value of Beta-3:
d.
Calculate the value of the ending inventory for Beta-1.
d.
Answer to Problem 68P
The value of ending inventory is $140,000 for Beta-1.
Explanation of Solution
Ending inventory:
Ending inventory unit is the units lying in the store due to its-non issuance in the current period. Ending inventory for the current period is the beginning inventory for the next period.
Calculate the ending inventory for Beta-1:
Thus, the value of ending inventory is $140,000.
Working note 8:
Calculate the units of ending inventory (unit):
Working note 9:
Calculate the units of ending inventory ($):
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Chapter 11 Solutions
Fundamentals Of Cost Accounting (6th Edition)
- ats Assume a company has three products-A, B, and C-that emerge from a joint process. The joint processing costs that are incurred up to the split-off point equal $1,200,000. The selling prices and outputs for each product at the split-off point are as follows: Product A B С Selling Price $33 per pound $29 per pound $24 per pound Product A B C Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: Output 14,000 pounds 18,000 pounds 19,000 pounds Additional Processing Costs $65,000 $72,000 $88,000 Selling Price $37 per pound $34 per pound $30 per pound The company is trying to decide whether to retain or discontinue the entire joint manufacturing process. What is the financial advantage (disadvantage) of continuing to operate the entire joint manufacturing process?arrow_forwardSell or Process Further Port Allen Chemical Company processes raw material D into joint products E and F. Raw material D costs $6 per liter. It costs $100 to convert 100 liters of D into 60 liters of E and 40 liters of F. Product F can be sold immediately for $6 per liter or processed further into Product G at an additional cost of $4 per liter. Product G can then be sold for $14 per liter. Determine whether Product F should be sold or processed further into Product G. • Calculate the net advantage (disadvantage) of further processing • Use a negative sign with your answer to indicate a net disadvantage (if applicable). $0 per literarrow_forwardNet Realizable Value Method, Decision to Sell at Split - off or Process Further Pacheco, Inc., produces two products, overs and unders, in a single process. The joint costs of this process were $60,000, and 15,000 units of overs and 34,000 units of unders were produced. Separable processing costs beyond the split - off point were as follows: overs, $20, 000; unders, $ 16,760. Overs sell for $2.00 per unit; unders sell for $ 3.14 per unit. Required: 1. Allocate the $60,000 joint costs using the estimated net realizable value method. Allocated Joint Cost Overs $ Unders $2. Suppose that overs could be sold at the split - off point for $1.80 per unit. Should Pacheco sell overs at split - off or process them further? Overs should not be processed further as there will be $ more profit if sold at split - off.arrow_forward
- Your Corporation produces products P, Q, and R from a joint production process. Each product may be sold at the split-off point or processed further. Joint production costs of $80,000 per year are allocated to the products based on the relative number of units produced. Which products should be processed further? P Q R Units produced 3,000 6,000 1,000 Selling price at split off $37,500 $46,500 $15,500 Cost to process further $10,000 $30,000 $5,000 Selling price after processing $50,000 $65,000 $25,000 a. P, Q and R b. P and Q c. Just P d. P and R e. Just Qarrow_forwardSell or Process Further Decisions Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $350,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows: Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below: Required: 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? 2. Based on your analysis in requirement 1, which product or products should he sold at the split-off point and which product or products should be processed further?arrow_forwardClark Kent Inc. buys crypton for $.80 a gallon. At the end of processing in Dept. 1, crypton splits off into products plutonium, tantalum, and xenon. Plutonium is sold at the split-off point with no further processing. Tantalum and xenon require further processing before they can be sold. Tantalum is processed in Dept. 2, and xenon is processed in Dept. 3. Following is a summary of costs and other related data for the year ended December 31: Dept. 1 Dept. 2 14,000 $51,000 $65,000 ...10,000 26,500 49,000 Factory overhead.... Plutonium Tantalum Xenon 45,000 15,000 $96,000$141,750 20,000 10,000 $30,000 30,000 No inventories were on hand at the beginning of the year, and no crypton was on hand at the end of the year. All gallons on hand at the end of the year were complete as to processing. Kent uses the net realizable value method of allocating joint costs. Step 1 - Find the following amounts. 1. Calculate the allocation of joint costs. 2. Calculate the total cost per unit for each…arrow_forward
- SELL OR PROCESS FURTHER Sasaw Company produces products C, I and T for a joint cost of P 200,000. Each product may be sold at its splitoff point or processed further. Additional processing costs are entirely variable. Relevant data are given below: Product Sales Value at Split-Off C P 100,000 I 200,000 T 50,000 . 350,000 Product Additional processing costs C P 80,000 I 40,000 T 60,000 . 180,000 Product Final sales value C P 250,000 I 200,000 T 100,000 .…arrow_forwardSell or Process Further, Basic Analysis Shenista Inc. produces four products (Alpha, Beta, Gamma, and Delta) from a common input. The joint costs for a typical quarter follow: The revenues from each product are as follows: Alpha, 100,000; Beta, 93,000; Gamma, 30,000; and Delta, 40,000. Management is considering processing Delta beyond the split-off point, which would increase the sales value of Delta to 75,000. However, to process Delta further means that the company must rent some special equipment that costs 15,400 per quarter. Additional materials and labor also needed will cost 8,500 per quarter. Required: 1. What is the operating profit earned by the four products for one quarter? 2. CONCEPTUAL CONNECTION Should the division process Delta further or sell it at split-off? What is the effect of the decision on quarterly operating profit?arrow_forwardClark Kent Inc. buys crypton for $.80 a gallon. At the end of processing in Dept. 1, crypton splits off into products plutonium, tantalum, and xenon. Plutonium is sold at the split-off point with no further processing. Tantalum and xenon require further processing before they can be sold. Tantalum is processed in Dept. 2, and xenon is processed in Dept. 3. Following is a summary of costs and other related data for the year ended December 31: No inventories were on hand at the beginning of the year, and no crypton was on hand at the end of the year. All gallons on hand at the end of the year were complete as to processing. Kent uses the net realizable value method of allocating joint costs. Required: Calculate the allocation of joint costs. Calculate the total cost per unit for each product. In examining the product cost reports, Lois Lane, Vice President—Marketing, notes that the per-unit cost of tantalum is greater than the selling price of $2.75 that can be received in the competitive marketplace. Lane wonders whether they should stop selling tantalum. How did Lane determine that the product was being sold at a loss? What per unit cost should be used in determining whether tantalum should be sold?arrow_forward
- Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for 25 per unit. Each quarter, 2,000 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: No significant non-unit-level costs are incurred. Morrill is considering two alternatives to supply the productive capacity for the subassembly. 1. Lease the needed space and equipment at a cost of 27,000 per quarter for the space and 10,000 per quarter for a supervisor. There are no other fixed expenses. 2. Drop the thickness gauge. The equipment could be adapted with virtually no cost and the existing space utilized to produce the subassembly. The direct fixed expenses, including supervision, would be 38,000, 8,000 of which is depreciation on equipment. If the thickness gauge is dropped, sales of the density gauge will not be affected. Required: 1. Should Morrill Company make or buy the subassembly? If it makes the subassembly, which alternative should be chosen? Explain and provide supporting computations. 2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What effect does this have on the decision? 3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 2,800 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are the same as in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision?arrow_forwardSell at Split-Off or Process Further Eunice Company produces two products from a joint process. Joint costs are 70,000 for one batch, which yields 1,000 liters of germain and 4,000 liters of hastain. Germain can be sold at the split-off point for 24 or be processed further, into geraiten, at a manufacturing cost of 4,100 (for the 1,000 liters) and sold for 33 per liter. If geraiten is sold, additional distribution costs of 0.80 per liter and sales commissions of 10% of sales will be incurred. In addition, Eunices legal department is concerned about potential liability issues with geraitenissues that do not arise with germain. Required: 1. CONCEPTUAL CONNECTION Considering only gross profit, should germain be sold at the split-off point or processed further? 2. CONCEPTUAL CONNECTION Taking a value-chain approach (by considering distribution, marketing, and after-the-sale costs), determine whether or not germain should be processed into geraiten.arrow_forwardIcy Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Product X Product Y Total Allocated joint processing costs 22400 19600 42000 Sales value at split-off point 32,000 28,000 60,000 Costs of further processing 11600 25,300 36,900 Sales value after further processing 40,800 54,200 95,000 Required:a) What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point? b) What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? c) What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?d) What is the minimum amount the company…arrow_forward
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