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Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher
Edition 2ISBN: 978-0077274993Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher
Edition 2ISBN: 978-0077274993 Exercise 54
Find Maximum Input Price: Estimated Net Realizable Value Method
Ticon Corporation's manufacturing operation produces two joint products. Product delta sells for $24 per unit at the split-off point. After an additional $225,000 of processing costs are incurred, product omega sells for $83 per unit. In a typical month, 76,000 units are processed; 60,000 units become product delta and 16,000 units become product omega.
The joint process has only variable costs. In a typical month, the conversion costs of the joint products amount to $456,300. Materials prices are volatile, and if prices are too high, the company stops production.
Required
Management has asked you to determine the maximum price that the company should pay for the materials.
a. Calculate the maximum price that Ticon should pay for the materials.
b. Write a brief memo to management explaining how you arrived at your answer in requirement ( a ).
Ticon Corporation's manufacturing operation produces two joint products. Product delta sells for $24 per unit at the split-off point. After an additional $225,000 of processing costs are incurred, product omega sells for $83 per unit. In a typical month, 76,000 units are processed; 60,000 units become product delta and 16,000 units become product omega.
The joint process has only variable costs. In a typical month, the conversion costs of the joint products amount to $456,300. Materials prices are volatile, and if prices are too high, the company stops production.
Required
Management has asked you to determine the maximum price that the company should pay for the materials.
a. Calculate the maximum price that Ticon should pay for the materials.
b. Write a brief memo to management explaining how you arrived at your answer in requirement ( a ).
Explanation
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Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher
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