Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 16, Problem 16.21E
Joint-cost allocation, insurance settlement. Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2017 is as follows:
Parts | Pounds of Product | Wholesale Selling Price per Pound When Production Is Complete |
Breasts | 100 | $0.55 |
Wings | 20 | 0.20 |
Thighs | 40 | 0.35 |
Bones | 80 | 0.10 |
Feathers | 10 | 0.05 |
Joint cost of production in July 2017 was $50.
A special shipment of 40 pounds of breasts and 15 pounds of wings has been destroyed in a fire. Quality Chicken’s insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Quality Chicken to use a joint-cost-allocation method. The splitoff point is assumed to be at the end of the production process.
- 1. Compute the cost of the special shipment destroyed using the following:
Required
- a. Sales value at splitoff method
- b. Physical-measure method (pounds of finished product)
- 2. What joint-cost-allocation method would you recommend Quality Chicken use? Explain.
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Farm Grown Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2017 is as follows:
Joint cost of production in July 2017 was $40.
A special shipment of 30pounds of breasts and 15 pounds of wings has been destroyed in a fire. Farm Grown Chicken's insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Farm Grown Chicken to use a joint-cost-allocation method. The splitoff point is assumed to be at the end of the production process.
Read the requirements2.
Requirement 1a. Compute the cost of the special shipment destroyed using the sales value at splitoff method.
Complete the table below to assist you. (Round the weighting to three decimal places and the allocated costs per pound to four decimal places. Round all other amounts to the nearest cent.)
Breast
Wings
Thighs
Bones
Feathers
Total
Pounds of product
90…
Joint-cost allocation. SW Flour Company buys 1 input of standard flour and refines it using a special sifting process to 3 cups of baking flour and 9 cups of bread flour. In May 2017, SW bought 12,000 inputs of flour for $89,000. SW spent another $47,800 on the special sifting process. The baking flour can be sold for $3.60 per cup and the bread flour for $4.80 per cup. SW puts the baking flour through a second process so it is super fine. This costs an additional $1.00 per cup of baking flour and the process yields ½ cup of super-fine baking flour for every one cup of baking flour used. The super-fine baking flour sells for $9.60 per cup.
SW Flour Company has decided that their bread flour may sell better if it was marketed for gourmet baking and sold with infused spices. This would involve additional cost for the spices of $0.80 per cup. Each cup could be sold for $5.50.
Q. If SW uses the sales value at splitoff method, what combination of products should SW sell to maximize profits?
Joint-cost allocation. SW Flour Company buys 1 input of standard flour and refines it using a special sifting process to 3 cups of baking flour and 9 cups of bread flour. In May 2017, SW bought 12,000 inputs of flour for $89,000. SW spent another $47,800 on the special sifting process. The baking flour can be sold for $3.60 per cup and the bread flour for $4.80 per cup. SW puts the baking flour through a second process so it is super fine. This costs an additional $1.00 per cup of baking flour and the process yields ½ cup of super-fine baking flour for every one cup of baking flour used. The super-fine baking flour sells for $9.60 per cup.
SW Flour Company has decided that their bread flour may sell better if it was marketed for gourmet baking and sold with infused spices. This would involve additional cost for the spices of $0.80 per cup. Each cup could be sold for $5.50.
Q.Explain the effect that the different cost-allocation methods have on the decision to sell the products at…
Chapter 16 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 16 - Give two examples of industries in which joint...Ch. 16 - What is a joint cost? What is a separable cost?Ch. 16 - Distinguish between a joint product and a...Ch. 16 - Why might the number of products in a joint-cost...Ch. 16 - Provide three reasons for allocating joint costs...Ch. 16 - Why does the sales value at splitoff method use...Ch. 16 - Prob. 16.7QCh. 16 - Distinguish between the sales value at splitoff...Ch. 16 - Give two limitations of the physical-measure...Ch. 16 - How might a company simplify its use of the NRV...
Ch. 16 - Why is the constant gross-margin percentage NRV...Ch. 16 - Managers must decide whether a product should be...Ch. 16 - Prob. 16.13QCh. 16 - Describe two major methods to account for...Ch. 16 - Why might managers seeking a monthly bonus based...Ch. 16 - Prob. 16.16MCQCh. 16 - Joint costs of 8,000 are incurred to process X and...Ch. 16 - Houston Corporation has two products, Astros and...Ch. 16 - Dallas Company produces joint products, TomL and...Ch. 16 - Earls Hurricane Lamp Oil Company produces both A-1...Ch. 16 - Joint-cost allocation, insurance settlement....Ch. 16 - Joint products and byproducts (continuation of...Ch. 16 - Net realizable value method. Sweeney Company is...Ch. 16 - Alternative joint-cost-allocation methods,...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Prob. 16.26ECh. 16 - Joint-cost allocation, sales value, physical...Ch. 16 - Joint-cost allocation: Sell immediately or process...Ch. 16 - Accounting for a main product and a byproduct....Ch. 16 - Joint costs and decision making. Jack Bibby is a...Ch. 16 - Joint costs and byproducts. (W. Crum adapted)...Ch. 16 - Methods of joint-cost allocation, ending...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Comparison of alternative joint-cost-allocation...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Joint-cost allocation. SW Flour Company buys 1...Ch. 16 - Further processing decision (continuation of...Ch. 16 - Joint-cost allocation with a byproduct. The...Ch. 16 - Byproduct-costing journal entries (continuation of...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Prob. 16.41PCh. 16 - Prob. 16.42PCh. 16 - Methods of joint-cost allocation, comprehensive....
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