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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Chapter 16, Problem 16.40P
Joint-cost allocation, process further or sell. Mountainair Construction Company (MCC) crushes boulders to obtain decorative rock, which they sell through various outlets. The process produces three grades of rock, which are viewed as joint products: Red Rock, a high-end decorative rock; White Rock, commonly used for landscaping purposes; and Gravel, used for driveway filler.
For each 2,000 pounds of boulder, MCC produces 400 pounds of Red Rock, 600 pounds of White Rock, and 1,000 pounds of Gravel. Data for August are provided below:
| Red Rock | White Rock | Gravel | |
| Production (pounds) | 8,000 | 12,000 | 20,000 |
| Selling price per pound at split off | $10.00 | $7.00 | $3.50 |
Joint costs are $190,000; there was no beginning or ending inventory. Because the Red Rock is sold at a premium, it is processed further to ensure uniformity of the rocks. The
Required
- 1. Allocate joint costs under each of the four methods. For the physical measure, use pounds of production.
- 2. Mr. Green, the president of MCC, wants to understand which method is best to use. Explain to Mr. Green the basis for each method and its effect on the financial statements. Also provide your recommendation for MCC and a rationale for that recommendation.
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Kirk Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Spock, Uhura, and Sulu. Each of these products can be sold as is, or each can be processed further and sold for a higher price. The company incurs joint costs of $178,600 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product.
Sales Value atSplit-Off Point
AllocatedJoint Costs
Cost to ProcessFurther
Sales Value ofProcessed Product
Spock
$209,500
$39,200
$110,100
$300,900
Uhura
299,900
59,100
85,100
400,900
Sulu
454,000
80,300
249,500
800,700
Determine the incremental profit or loss that each of the three joint products. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Spock
Uhura
Sulu…
Kirk Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Spock, Uhura, and Sulu. Each of these products can be sold as is, or each can be processed further and sold for a higher price. The company incurs joint costs of $179,400 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product.
Sales Value atSplit-Off Point
AllocatedJoint Costs
Cost to ProcessFurther
Sales Value ofProcessed Product
Spock
$209,700
$40,000
$109,600
$300,900
Uhura
300,000
60,200
84,900
399,900
Sulu
455,500
79,200
249,500
800,500
Determine the incremental profit or loss that each of the three joint products.
Spock
Uhura
Sulu
Incremental profit (loss)
$
$
$
Indicate whether each of the three joint products should be sold as…
Pharoah Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint
products: Spock, Uhura, and Sulu. Each of these products can be sold as is, or each can be processed further and sold for a higher price.
The company incurs joint costs of $182,100 to process one batch of the raw material that produces the three joint products. The
following cost and sales information is available for one batch of each product.
Spock
Uhura
Sulu
Sales Value at
Split-Off Point
$209,600
299,800
455,800
Allocated
Joint Costs
$40,200
60,900
81,000
Cost to Process
Further
$109,700
84,700
250,200
Sales Value of
Processed Product
$300,900
400,600
799,600
Determine the incremental profit or loss that each of the three joint products. (Enter negative amounts using either a negative sign
preceding the number eg.-45 or parentheses e.g. (45))
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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Incremental Analysis - Sell or Process Further; Author: Melissa Shirah;https://www.youtube.com/watch?v=7D6QnBt5KPk;License: Standard Youtube License