Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Textbook Question
Chapter 19, Problem 3PB
Joint cost allocation
McKenzie’s Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process that costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000 bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off point. Each product is processed further after the split-off point, but the market value of a bottle of any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs of morning glory, snowflake sparkle, and sea breeze hand soap are 10.50, $0.55, and $0.60 per bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for $2.00, $2.20, and $2.40 per bottle, respectively.
Instructions
- 1. Using the net realizable value method, allocate the joint costs of production to each product.
- 2. Explain why McKenzie’s Soap Sensations, Inc., always chooses to process each variety of hand soap beyond the split-off point.
- 3. If demand for all products was the same, which product should McKenzie’s Soap Sensations, Inc., produce in the highest quantity?
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Joint cost allocation
Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of $250 per batch. At the split-off point, one batch produces 80, 40, and 25 bottles of hand, body, and foot lotion, respectively. After the split-off point, hand lotion is sold immediately for $2.50 per bottle. Body lotion is processed further at an additional cost of $0.25 per bottle and then sold for $5.75 per bottle. Foot lotion is processed further at an additional cost of $0.85 per bottle and then sold for $4.00 per bottle. Assume that body and foot lotion could be sold at the split-off point for $3.00 and $3.20 per bottle, respectively.
Using the market value at split-off method, allocate the joint costs of production to each product. Round your answers to two decimal places.
Joint Product
Bottlesper Batch
Market Valueper Bottle atSplit-Off
Total MarketValue atSplit-Off
Percent ofTotal MV…
Joint Cost Allocation—Physical Units Method
Board-It, Inc., produces the following types of 2 × 4 × 10 wood boards: washed, stained, and pressure treated. These products are produced jointly until they are cut. One batch produces 45 washed boards, 35 stained boards, and 20 pressure treated boards. The joint production process costs a total of $710 per batch.
Using the physical units method, allocate the joint production cost to each product. Round your answers to two decimal places.
Joint Product
Allocation
Washed
$
Stained
Pressure treated
Totals
$
Joint Cost Allocation—Physical Units Method
Board-It, Inc., produces the following types of 2 × 4 × 10 wood boards: washed, stained, and pressure treated. These products are produced jointly until they are cut. One batch produces 45 washed boards, 35 stained boards, and 20 pressure treated boards. The joint production process costs a total of $710 per batch.
Using the physical units method, allocate the joint production cost to each product. Round your answers to two decimal places.
Chapter 19 Solutions
Financial And Managerial Accounting
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- Joint cost allocation Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of 250 per batch. At the split-off point, one batchproduces 80, 40, and 25 bottles of hand, body, and foot lotion, respectively. After the split-off point,hand lotion is sold immediately for 2.50 per bottle. Body lotion is processed further at an additional cost of 0.25 per bottle and then sold for 5.75 per bottle. Foot lotion is processed further atan additional cost of 0.85 per bottle and then sold for 4.00 per bottle. Assume that body and footlotion could be sold at the split-off point for 3.00 and 3.20 per bottle, respectively. Instructions 1. Using the market value at split-off method, allocate the joint costs of production to each product. 2. Based on the information provided and your answer to part (1), should Lovely LotionInc. continue processing body and foot lotion after the split-off point? 3. Allocate the joint costs of production to each product using the net realizable value method.arrow_forwardBoard-It, Inc., produces the following types of 2 4 10 wood boards: washed, stained, and pressure treated. These products are produced jointly until they are cut. One batch produces 45 washed boards, 35 stained boards, and 20 pressure treated boards. The joint production process costs a total of 710 per batch. Using the physical units method, allocate the joint production cost to each product.arrow_forwardMan OFort Inc. produces two different styles of door handles, standard and curved. The door handles go through a joint production molding process costing 29,000 per batch and producing 2,000 standard door handles and 1,000 curved door handles at the split-off point. Both door handles undergo additional production processes after the split-off point, but could be sold at that point: the standard style for 4 per door handle and the curved style for 2 per door handle. Determine the amount of joint production costs allocated to each style of door handle using the market value at split-off method.arrow_forward
- Oakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of Beracyl in a joint production process, incurring 250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced. Mononate and Beracyl can each be sold at the split-off point in a semifinished state or, alternatively, processed further. Additional data about the two products are as follows: An assistant in the companys cost accounting department was overheard saying ...that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is simply not worth the effort. Which of the following strategies should be recommended for Oakes?arrow_forwardTucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000-gallon drums for 2.000. Processing costs are 3,000 to process the 1,000 gallons of Duointo 800 gallons of Big and 200 gallons of Mini. The selling price is 9 per gallon for Big and4 per gallon for Mini. If the physical units method is used to allocate joint costs to the finalproducts, the total cost allocated to produce Mini is: a. 500. b. 4,000. c. 1,000. d. 4,500.arrow_forwardBreegle Company produces three products (B-40, J-60, and H-102) from a single process. Breegle uses the physical volume method to allocate joint costs of 22,500 per batch to theproducts. Based on the following information, which product(s) should Breegle continue toprocess after the split-off point in order to maximize profit? a. B-40 only b. J-60 only c. H-102 only d. B-40 and H-102 onlyarrow_forward
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- Joint Cost Allocation-Physical Units Method Blake's Blacksmith Co. produces two types of shotguns, a 12-gauge and 20-gauge. The shotguns are made through a joint production process that ultimately produces 40 12-gauge shotguns and 10 20-gauge shotguns and costs a total of $3,700 per batch. After the split-off point, each type of shotgun goes through an additional crafting process before it is sold. The additional production process of the 12-gauge shotgun costs $40 per gun, after which it is sold for $176 per gun. The additional production process of the 20-gauge shotgun costs $26 per gun, after which it is sold for $146 per gun. Determine the amount of joint production costs allocated to each type of shotgun using the physical units method. Joint Product Allocation 12-gauge shotgun 20-gauge shotgun Totalsarrow_forwardJoint Product Standard door handle Joint Cost Allocation-Market Value at Split-off Method Man O'Fort Inc. produces two different styles of door handles, standard and curved. The door handles go through a joint production molding process costing $27,000 per batch and producing 1,800 standard door handles and 900 curved door handles at the split-off point. Both door handles undergo additional production processes after the split-off point, but could be sold at that point: the standard style for $8 per door handle and the curved style for $4 per door handle. Determine the amount of joint production costs allocated to each style of door handle using the market value at split-off method. Curved door handle Show Me How Totals Allocation My Work 2 more Check My Work uses remaining. #0 Previous Upda Nextarrow_forwardJoint Cost Allocation—Weighted average method Gordon's Smoothie Stand makes three types of smoothies: blueberry lemon, orange swirl, and triple berry. Before all flavors are added, the smoothies go through a joint mixing process that costs a total of $43 per batch. One batch produces 21.75 cups of blueberry lemon smoothies, 29 cups of orange swirl smoothies, and 36.25 cups of triple berry smoothies. In addition, Gordon has studiously noted that the mixing process necessary for triple berry and blueberry lemon smoothies takes twice as long as it does for orange swirl smoothies. Allocate the joint costs of production to each product using the weighted average method. Round your answers to two decimal places.arrow_forward
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