Exam 17: Cost Allocation: Joint Products and Byproducts

Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During the summer of 2014, the joint costs of processing the tomatoes were $420,000. There was no beginning or ending inventories for the summer. Production and sales value information for the summer is as follows: Required: Determine the amount allocated to each product if the estimated net realizable value method is used, and compute the cost per case for each product.

Argon Manufacturing Company processes direct materials up to the splitoff point where two products (U and V) are obtained and sold. The following information was collected for last quarter of the calendar year: The cost of purchasing 20,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 19,000 gallons of good products was $1,950,000. Beginning inventories totaled 100 gallons for U and 50 gallons for V. Ending inventory amounts reflected 600 gallons of Product U and 1,050 gallons of Product V. October costs per unit were the same as November. What are the physical-volume proportions for products U and V, respectively?

Dubai Tourist Corporation makes miniature statues of the Burj Khalifa from cast iron. Sales total 50,000 units a year. The statues are finished either rough or polished, with an average demand of 60% rough and 40% polished. Iron ingots, the direct material, costs $6 per pound. Processing costs are $300 to convert 30 pounds into 60 statues. Rough statues are sold for $15 each, and polished statues can be sold for $18 or engraved for an additional cost of $5. Polished statues can then be sold for $30. Required: Determine whether Dubai Tourist Company should sell the engraved statutes. Why?

Answer the following questions using the information below: The Mona Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was $144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable gallon. Xyla can be sold for $18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $2.50. The product can be sold for $9 per gallon. There are no beginning and ending inventory balances. -How much (if any) extra income would Mona Company earn if it produced and sold all of the Xyla from the condensed goat milk? Allocate joint processing costs based upon relative sales value on the splitoff. (Extra income means income in excess of what Mona Company would have earned from selling condensed goat milk.)

Fresh Juice Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July: The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters of good products was $4,500. There were no inventory balances of A and B. Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters. Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters. If Product Z5 and Product W3 are produced, what are the expected sales values of production, respectively?

Yakima Manufacturing purchases trees from Cheney Lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of May: Yakima's Manufacturing's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper. What are the paper's and the pencils' approximate weighted cost proportions using the sales value at splitoff method, respectively?

Cola Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July: The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters of good products was $4,500. There were no inventory balances of A and B. Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters. Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters. What is Product Z5's estimated net realizable value at the splitoff point?

Answer the following questions using the information below: The Mona Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was $144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable gallon. Xyla can be sold for $18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $2.50. The product can be sold for $9 per gallon. There are no beginning and ending inventory balances. -What is the estimated net realizable value of Xyla at the splitoff point?

Answer the following questions using the information below: The Ashram Corporation processes a liquid component up to the splitoff point where two products, Mr. DirtOut and Mr. SinkClean, are produced and sold. There was no beginning inventory. The following material was collected for the month of January: Direct materials processed: 250,000 gallons (242,500 gallons of good product) Production: Mr. DirtOut 147,500 gallons Mr. SinkClean 95,000 gallons Sales: Mr. DirtOut 140,500 at $110 per gallon Mr. SinkClean 91,000 at $ 100 per gallon The cost of purchasing 250,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 242,500 gallons of good product was $760,000. -When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated to Mr. DirtOut and Mr. SinkClean?

Answer the following questions using the information below: The Mona Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was $144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable gallon. Xyla can be sold for $18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $2.50. The product can be sold for $9 per gallon. There are no beginning and ending inventory balances. -Using estimated net realizable value, what amount of the $72,240 of joint costs would be allocated Xyla and the skim goat ice cream?

In each of the following industries, identify possible joint (or severable) products at the splitoff point. a. Coal b. Petroleum c. Dairy d. Lamb e. Lumber f. Cocoa Beans g. Salt h. Cow-hide

Answer the following questions using the information below: The Ashram Corporation processes a liquid component up to the splitoff point where two products, Mr. DirtOut and Mr. SinkClean, are produced and sold. There was no beginning inventory. The following material was collected for the month of January: Direct materials processed: 250,000 gallons (242,500 gallons of good product) Production: Mr. DirtOut 147,500 gallons Mr. SinkClean 95,000 gallons Sales: Mr. DirtOut 140,500 at $110 per gallon Mr. SinkClean 91,000 at $ 100 per gallon The cost of purchasing 250,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 242,500 gallons of good product was $760,000. -What are the physical-volume proportions to allocate joint costs for Mr. DirtOut and Mr. SinkClean, respectively?