Alternative methods of joint-cost allocation, ending inventories. The Cook Company operates a simple chemical process to convert a single material into three separate items, referred to here as X, Y, and Z. All three end products are separated simultaneously at a single splitoff point.
Products X and Y are ready for sale immediately upon splitoff without further processing or any other additional costs. Product Z, however, is processed further before being sold. There is no available market price for Z at the splitoff point.
The selling prices quoted here are expected to remain the same in the coming year. During 2017, the selling prices of the items and the total amounts sold were as follows:
- X—68 tons sold for $1,200 per ton
- Y—480 tons sold for $900 per ton
- Z—672 tons sold for $600 per ton
The total joint
There were no beginning inventories of X, Y, or Z. At the end of the year, the following inventories of completed units were on hand: X, 132 tons; Y, 120 tons; Z, 28 tons. There was no beginning or ending work in process.
- 1. Compute the cost of inventories of X, Y, and Z for balance sheet purposes and the cost of goods sold for income statement purposes as of December 31, 2017, using the following joint-cost-allocation methods:
Required
- a. NRV method
- b. Constant gross-margin percentage NRV method
- 2. Compare the gross-margin percentages for X, Y, and Z using the two methods given in requirement 1.
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- Double Company produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Double's production, sales, and costs follows. DBB-1 DBB-2 DBB-3 Total Units Sold 16,200 24,300 36,300 76,800 Price (after additional processing) $ 65 $ 50 $ 75 Separable Processing cost $ 112,000 $ 46,000 $ 68,000 $ 226,000 Units Produced 16,200 24,300 36,300 76,800 Total Joint Cost $ 3,610,000 Sales Price at Split-off $ 25 $ 35 $ 55 The amount of joint costs allocated to product DBB-1 using the physical measure method is: Multiple Choice $752,083. $761,484. $1,706,289. $1,203,333. $1,142,227.arrow_forwardDouble Company produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Double's production, sales, and costs follows. DBB-1 DBB-2 DBB-3 Total Units Sold 18,200 27,300 39,300 84,800 Price (after additional processing) $ 65 $ 50 $ 75 Separable Processing cost $ 125,125 $ 50,050 $ 72,050 $ 247,225 Units Produced 18,200 27,300 39,300 84,800 Total Joint Cost $ 4,040,000 Sales Price at Split-off $ 25 $ 35 $ 55 The amount of joint costs allocated to product DBB-2 using the sales value at split-off method is: Multiple Choice $1,080,689. $766,632. $514,614. $955,500. $2,444,698.arrow_forwardDouble Company produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Double's production, sales, and costs follows. DBB-1 DBB-2 DBB-3 Total Units Sold 16,000 24,000 36,000 76,000 Price (after additional processing) $ 65 $ 50 $ 75 Separable Processing cost $ 110,000 $ 44,000 $ 66,000 $ 220,000 Units Produced 16,000 24,000 36,000 76,000 Total Joint Cost $ 3,600,000 Sales Price at Split-off $ 25 $ 35 $ 55 The amount of joint costs allocated to product DBB-1 using the sales value at split-off method is:arrow_forward
- Inseparable Company produces products X and Y in a joint manufacturing process. The joint cost allocated to Product X is P15 and to Product Y is P10. At the point of splitting-off in the manufacturing process, Product Y can be sold for P15. The company is considering to incur additional processing cost of P4 for Product Y, after which the product can be sold for P22. Should Product Y be processed further or just sold at split-off point? Support your answer wirh computations and text.arrow_forwardMarin Products produces three products – DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows. DBB-1 DBB-2 DBB-3 Total Units Sold 16,000 24,000 36,000 76,000 Price (after addt'l processing) $ 65 $ 50 $ 75 Separable Processing cost $110,000 $44,000 $66,000 $ 220,000 Units Produced 16,000 24,000 36,000 76,000 Total Joint Cost $3,600,000 Sales Price at Split-off 25 $ 35 $ 55 The amount of joint costs allocated to product DBB-3 using the sales value at split-off method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):arrow_forwardMarin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows. DBB-1 DBB-2 DBB-3 Total Units Sold 11,000 17,000 24,000 52,000 Price (after addt’l processing) $ 10 $ 25 $ 30 Separable Processing cost $ 282,000 $ 114,000 $ 169,000 $ 565,000 Units Produced 17,600 31,000 39,400 88,000 Total Joint Cost $ 4,800,000 Sales Price at Split-off $ 20 $ 30 $ 50 The amount of joint costs allocated to product DBB-3 using the physical measure method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest…arrow_forward
- A company manufactures two joint products at a joint cost of 1,000. These products can be sold at split-off, or when further processed at an additional cost, sold as higher quality items. The decision to sell at split-off or further process should be based on the: A. allocation of the 1,000 joint cost using the quantitative unit measure B. assumption that the 1,000 joint cost is irrelevant C. allocation of the $1,000 joint cost using the relative sales value approach D. assumption that the 1,000 joint cost must be allocated using a physical-measure approach E. allocation of the 1,000 joint cost using any equitable and rational allocation basisarrow_forwardACE Company makes two products A and B. They are initially processed from the same materials and then after split off, further processed separately. Additional information is as follows: A B TOTAL Final sales value Sales value at split off Cost beyond split off Joint cost prior to split off 81,000 66,000 18,000 99,000 94,000 22,000 180,000 160,000 40,000 30,000 Answer the following: 1. Compute the joint cost assigned to A and B using the Actual Net Realizable Value approach. 2. Compute the joint cost assigned to A and B using the Approximated Net Realizable Value approach.arrow_forwardMephis Manufacturing has a manufacturing process that results in four separate products that together incur some portion of joint costs. If the appropriate split-off point is determined to be at the third stage in the production process, how will the costs incurred after the third stage be accounted for?arrow_forward
- Joint Products; By-Products (Appendix) The Marshall Company has a joint production process that produces two joint products and a by-product. The joint products are Ying and Yang, andthe by-product is Bit. Marshall accounts for the costs of its products using the net realizable valuemethod. The two joint products are processed beyond the split-off point, incurring separable processing costs. There is a $1,000 disposal cost for the by-product. A summary of a recent month’s activityat Marshall is shown below:Ying Yang BitUnits sold 50,000 40,000 10,000Units produced 50,000 40,000 10,000Separable processing costs—variable $140,000 $42,000 $—Separable processing costs—fixed $10,000 $8,000 $—Sales price $6.00 $12.50 $1.60Total joint costs for Marshall in the recent month are $265,000, of which $115,000 is a variable cost.Required1. Calculate the manufacturing cost per unit for each of the three products.2. Calculate the total gross margin for each productarrow_forwardWhich of the following statements is false? Multiple Choice Examples of selling costs include shipping, sales commissions, and costs of finished goods warehouses. Discretionary fixed costs may be altered in the short term by current managerial decisions. A particular cost may be direct or indirect depending on the cost object. All sunk costs should be ignored in making a decision. Some of the conversion costs are period costs.arrow_forwardb) Paste Corporation has established new plant for the production of new product called “Diazinon”. There are two different manufacturing methods available to produce Diazinon. Either by using a process or an order base method. The assembling technique won't influence the quality or deals of the item. The evaluated manufacturing expenses of the two strategies are as per the following:Process base Order baseVariable manufacturing cost per unit..................... Rs14.00 Rs.17.60Fixed manufacturing cost per year ......................Rs. 2,440,000 Rs. 1,320,000 The organization's statistical surveying office has suggested an initial selling cost of Rs.35 per unit for Diazinon. The yearly fixed selling and admin costs of the Diazinon are Rs.500, 000. The variable selling and regulatory costs are Rs. 2 per unit. Required: I. CM ratio and variable expenses ratio. If Paste Corporation uses the:1. Process base manufacturing method.2. Order base manufacturing method.II. Break-even point in…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning