Northern Company processes 100 gallons of raw materials into 75 gallons of product GS-50 and 25 gallons of GS-80. GS-50 is further processed into 50 gallons of product GS-505 at a cost of $7,400, and GS-80 is processed into 50 gallons of product GS-805 at a cost of $5,975. The production process starts at point 1. A total of $20,000 in joint manufacturing costs are incurred in reaching point 2. Point 2 is the split-off point of the process that manufactures GS-50 and GS-80. At this point, GS-50 can be sold for $750 a gallon, and GS-80 can be sold for $150 a gallon. The process is completed at point 3—products GS-505 and GS-805 have a sales price of $590 a gallon and $230 a gallon, respectively. Required: Allocate the joint product costs and then compute the cost per unit using each of the following methods: (1) physical measure, (2) sales value at split-off, and (3) net realizable value. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) GS-50 cost per unit GS-80 cost per unit Total cost per unit (1) Physical measure $ (2) Sales value at split-off $ GS-505 cost per unit GS-805 cost per unit Total cost per unit (3) Net realizable value $

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 27E: Pacheco, Inc., produces two products, overs and unders, in a single process. The joint costs of this...

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Question

Northern Company processes 100 gallons of raw materials into 75 gallons of product GS-50 and 25 gallons of GS-80. GS-50 is further processed into 50 gallons of product GS-505 at a cost of $7,400, and GS-80 is processed into 50 gallons of product GS-805 at a cost of $5,975.

The production process starts at point 1. A total of $20,000 in joint manufacturing costs are incurred in reaching point 2. Point 2 is the split-off point of the process that manufactures GS-50 and GS-80. At this point, GS-50 can be sold for $750 a gallon, and GS-80 can be sold for $150 a gallon. The process is completed at point 3—products GS-505 and GS-805 have a sales price of $590 a gallon and $230 a gallon, respectively.

Required:

Allocate the joint product costs and then compute the cost per unit using each of the following methods: (1) physical measure, (2) sales value at split-off, and (3) net realizable value. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)