Exam 15: Cost Allocation: Joint Products and Byproducts

Answer the following question(s)using the information below: The Morton 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 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage)of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre.Xyla can be sold for $18 per litre.Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional processing cost per usable litre of $2.50.The product can be sold for $9 per litre.There are no beginning and ending inventory balances. -What is the reason that accountants do not like to carry inventory at net realizable value?

Answer the following questions using the information below: 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 November: The cost of purchasing 100 trees and processing them up to the splitoff point to yield 60,000 sheets of paper and 60,000 pencil casings is $3,000.Yakima's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper. -If the sales value at splitoff method is used, what is the approximate production cost for each pencil casing?

Match each of the following costs with the appropriate joint production process cost classification. A)separable cost B)joint cost -Cost of refining gasoline for use in automobiles.

Use the information below to answer the following question(s).Chem Manufacturing Company processes direct materials up to the splitoff point, where two products (X and Y)are obtained and sold.The following information was collected for the month of November.Direct materials processed: 10,000 litres (10,000 litres yield 9,500 litres of good product and 500 litres of shrinkage) The cost of purchasing 10,000 litres of direct materials and processing it up to the splitoff point to yield a total of 9,500 litres of good products was $975,000.The beginning inventories totalled 50 litres for X and 25 litres for Y.Ending inventory amounts reflected 300 litres of product X and 525 litres of product Y.October costs were per unit were the same as November. -What is the approximate portion of the joint costs that should be allocated to products X and Y, respectively, using a physical volume measure?

Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery 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 October.Trees processed: 50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap) Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock. -What are the approximate joint costs assigned to the paper ending inventory if joint costs are allocated using the sales value at splitoff method?

Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery 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 October.Trees processed: 50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap) Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock. -What is the paper's sales value at the splitoff point?

Use the information below to answer the following question(s).Beverage 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: Direct materials processed: 2,500 litres (with 20 percent shrinkage) Cost of purchasing 2,500 litres of direct materials and processing it up to the splitoff point to yield a total of 2,000 litres 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 litres of Product Z5 for an additional processing cost of $150.Product Z5 is sold for $25.00 per litre.There was no beginning inventory and ending inventory was 125 litres.Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost of $275.Product W3 is sold for $30.00 per litre.There was no beginning inventory and ending inventory was 25 litres. -What is Product Z5's and Product W3's respective production cost per unit, assuming the company allocates joint costs on the basis of net realizable value?

Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes.During the summer 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 were 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.

Match each of the following costs with the appropriate joint production process cost classification. A)scrap B)joint product C)byproduct D)main product -Skim milk from dairy processing

Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery 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 October.Trees processed: 50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap) Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock. -What is the approximate production cost per unit for each pencil casing if the sales value at splitoff method is used?

What are the four methods of allocating joint costs to individual products? Which of these methods is preferred, and what are two advantages of this method?

A business which enters into a contract to purchase a product (or products)and will compensate the manufacturer under a cost reimbursement formula, should take an active part in the determination of how joint costs are allocated because