Concept explainers
Joint-cost allocation: Sell immediately or process further. Nervana Soy Products (NSP) buys soybeans and processes them into other soy products. Each ton of soybeans that NSP purchases for $350 can be converted for an additional $210 into 650 pounds of soy meal and 100 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.32 and soy oil can be sold in bulk for $4.50 per gallon.
NSP can process the 650 pounds of soy meal into 750 pounds of soy cookies at an additional cost of $300. Each pound of soy cookies can be sold for $2.32 per pound. The 100 gallons of soy oil can be packaged at a cost of $230 and made into 400 quarts of Soyola. Each quart of Soyola can be sold for $1.15.
- 1. Allocate the joint cost to the soy cookies and the Soyola using the following:
Required
- a. Sales value at splitoff method
- b. NRV method
- 2. Should NSP have processed each of the products further? What effect does the allocation method have on this decision?
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Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
- Soy Products (DSP) buys soybeans and processes them into other soy products. Each ton of soybeans that DSP purchases for $260 can be converted for an additional $170 into 575lbs of soy meal and 140 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.48 and soy oil can be sold in bulk for $4.75 per gallon. DSP can process the 575 pounds of soy meal into 725 pounds of soy cookies at an additional cost of $370. Each pound of soy cookies can be sold for $2.48 per pound. The 140gallons of soy oil can be packaged at a cost of $200 and made into 560quarts of Soyola. Each quart of Soyola can be sold for $1.45.arrow_forwardNervana Soy Products (NSP) buys soybeans and processes them into other soy products. Each ton of soybeans that NSP purchases for $350 can be converted for an additional $210 into 650 lbs of soy meal and 100 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.32 and soy oil can be sold in bulk for $4.5 per gallon. NSP can process the 650 pounds of soy meal into 750 pounds of soy cookies at an additional cost of $300. Each pound of soy cookies can be sold for $2.32 per pound. The 100 gallons of soy oil can be packaged at a cost of $230 and made into 400 quarts of Soyola. Each quart of Soyola can be sold for $1.15. Read the requirements. Requirement 1. Allocate the joint cost to the cookies and the Soyola using the (a) Sales value at splitoff method and (b) NRV method. a. First, allocate the joint cost using the Sales value at splitoff method. (Round the weights to three decimal places and joint costs to the nearest dollar.) Sales value of total production at splitoff…arrow_forwardSaskatchewan Soy Products (SSP) buys soy beans and processes them into other soy products. Each tonne of soy beans that SSP purchases for $280 can be converted for an additional $200 into 550 lbs of soy meal and 100 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.48, and soy oil can be sold in bulk for $4.75 per gallon. SSP can process the 550 lbs of soy meal into 700 lbs of soy cookies at an additional cost of $380. Each pound of soy cookies can be sold for $2.48 per pound. The 100 gallons of soy oil can be packaged at a cost of $200 and made into 400 quarts of Soyola. Each quart of Soyola can be sold for $1.35. Required 1. Allocate the joint cost to the cookies and the Soyola using: a. Sales value at splitoff method b. NRV method 2. Should the company have processed each of the products further? What effect does the allocation method have on this decision? www Requirement 1a. Allocate the joint cost to the cookies and the Soyola using the sales value at…arrow_forward
- Illion Soy Products (ASP) buys soybeans and processes them into other soy products. Each ton of soybeans that ASP purchases for $250 can be converted for an additional $180 into 700 lbs of soy meal and 80 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.08 and soy oil can be sold in bulk for $4 per gallon. ASP can process the 700 pounds of soy meal into 800 pounds of soy cookies at an additional cost of $370. Each pound of soy cookies can be sold for $2.08 per pound. The 80 gallons of soy oil can be packaged at a cost of $200 and made into 320 quarts of Soyola. Each quart of Soyola can be sold for $1.45. Read the requirements. Requirement 1. Allocate the joint cost to the cookies and the Soyola using the (a) Sales value at splitoff method and (b) NRV method. a. First, allocate the joint cost using the Sales value at splitoff method. (Round the weights to three decimal places and joint costs to the nearest dollar.) Sales value of total production at splitoff…arrow_forwardlowa Soy Products (ISP) buys soy beans and processes them into other soy products. Each ton of soy beans can be converted into 500 pounds of soy meal and 100 gallons of soy oil. This process incurs joint costs of $ 540. At splitoff point; soy meal can be sold for $4 per pound, and soy ol can be sold for $5 per gallon. ISP can process the 500 pounds of soy meal into 600 pounds of soy cookies at an additional cost of $1500. Each pound of soy cookles can be sold for $6 per pound. The 100 gallons of soy oil can be packaged at an additional cost of $300 and made into 400 liters of Soyola. Each liter of Soyola can be sold for $3. (For each item below write your answers inside the boxes.) a) What is the total sales value (from both products) at splitoff point? Ans. = $ b) Using sales value at splitoff method, what amount of the joint costs ($ 540) would be allocated to soy meal Ans, = $ C) Using net realizable value method, what amount of the joint costs ($ 540) would be allocated to Soyola?…arrow_forwardIllion Soy Products (ASP) buys soybeans and processes them into other soy products. Each ton of soybeans that ASP purchases for $320 can be converted for an additional $220 into 525 lbs of soy meal and 120 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.32 and soy oil can be sold in bulk for $4.5 per gallon. ASP can process the 525 pounds of soy meal into 675 pounds of soy cookies at an additional cost of $310. Each pound of soy cookies can be sold for $2.32 per pound. The 120 gallons of soy oil can be packaged at a cost of $250 and made into 480 quarts of Soyola. Each quart of Soyola can be sold for $1.15. Read the requirements. Requirement 1. Allocate the joint cost to the cookies and the Soyola using the (a) Sales value at splitoff method and (b) NRV method. a. First, allocate the joint cost using the Sales value at splitoff method. (Round the weights to three decimal places and joint costs to the nearest dollar.) Sales value of total production at splitoff…arrow_forward
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