Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 5, Problem 18E
Joint cost allocation —net realizable value method
Lily’s Lemonade Stand makes three types of lemonade: pure, raspberry, and strawberry. The lemonade is produced through a joint mixing
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Joint Cost Allocation—Weighted average method
Gordon's Smoothie Stand makes three types of smoothies: blueberry lemon, orange swirl, and triple berry. Before all flavors are added, the smoothies go through a joint mixing process that costs a total of $43 per batch. One batch produces 21.75 cups of blueberry lemon smoothies, 29 cups of orange swirl smoothies, and 36.25 cups of triple berry smoothies. In addition, Gordon has studiously noted that the mixing process necessary for triple berry and blueberry lemon smoothies takes twice as long as it does for orange swirl smoothies.
Allocate the joint costs of production to each product using the weighted average method. Round your answers to two decimal places.
Joint Cost Allocation—Physical Units Method
Board-It, Inc., produces the following types of 2 × 4 × 10 wood boards: washed, stained, and pressure treated. These products are produced jointly until they are cut. One batch produces 45 washed boards, 35 stained boards, and 20 pressure treated boards. The joint production process costs a total of $710 per batch.
Using the physical units method, allocate the joint production cost to each product. Round your answers to two decimal places.
Joint Product
Allocation
Washed
$
Stained
Pressure treated
Totals
$
Joint Cost Allocation-Net Realizable Value Method
Lily's Lemonade Stand makes three types of lemonade: pure, raspberry, and strawberry. The lemonade is produced through a joint mixing process that costs a total of
$30 per batch. One batch produces 32 cups of pure lemonade, 21 cups of strawberry lemonade, and 21 cups of raspberry lemonade. After the split-off point, all three
lemonades can be sold for $0.80 per cup, but strawberry and raspberry lemonade can be processed further by adding artificial coloring and flavoring and sold for $0.95
and $1.00 per cup, respectively. It is estimated that these additional processing costs are $0.75 and $1.80 per batch for strawberry and raspberry lemonade, respectively.
Allocate the joint costs of production to each product using the net realizable value method.
Joint Product
Pure lemonade
Strawberry lemonade
Raspberry lemonade
Totals
Allocation
Chapter 5 Solutions
Managerial Accounting
Ch. 5 - Why are support department costs difficult to...Ch. 5 - Why does support department cost allocation matter...Ch. 5 - What are some drawbacks of applying support...Ch. 5 - Why is the diect method of support department cost...Ch. 5 - How does management determine the order in which...Ch. 5 - Are large or small companies more likely to use...Ch. 5 - What is the main difference between the physical...Ch. 5 - When would management most likely use the net...Ch. 5 - What are the two most often used ways of...Ch. 5 - How can support department and joint cost...
Ch. 5 - Charlies Wood Works produces wood products (e.g.,...Ch. 5 - Bucknum Boys, Inc., produces hunting gear for buck...Ch. 5 - Prob. 3BECh. 5 - Blakes Blacksmith Co. produces two types of...Ch. 5 - Garys Grooves Co. produces two types of carving...Ch. 5 - Prob. 6BECh. 5 - Yo-Down Inc. produces yogurt. Information related...Ch. 5 - Prob. 2ECh. 5 - Blue Africa Inc. produces laptops and desktop...Ch. 5 - Christmas Timber, Inc., produces Christmas trees....Ch. 5 - Crystal Scarves Co. produces winter scarves. The...Ch. 5 - Davis Snowflake Co. produces Christmas stockings...Ch. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Support department cost allocation comparison...Ch. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Joint cost allocation market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Joint cost allocation-market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Support department cost allocation Blue Mountain...Ch. 5 - Support activity cost allocation Jakes Gems mines...Ch. 5 - Joint cost allocation Lovely Lotion Inc. produces...Ch. 5 - Joint cost allocation Florissas Flowers jointly...Ch. 5 - Support department cost allocation Hooligan...Ch. 5 - Support activity cost allocation Kizzles Crepes...Ch. 5 - Joint cost allocation McKenzies Soap Sensations,...Ch. 5 - Prob. 4PBCh. 5 - Analyze Milkrageous, Inc. Milkragcous, Inc., a...Ch. 5 - Analyze Horsepower Hookup, Inc. Horsepower Hookup,...Ch. 5 - Prob. 3MADCh. 5 - Prob. 4MADCh. 5 - Joint cost allocation and performance evaluation...Ch. 5 - Prob. 3TIFCh. 5 - Prob. 1CMACh. 5 - Adam Corporation manufactures computer tables and...Ch. 5 - Breegle Company produces three products (B-40,...Ch. 5 - Tucariz Company processes Duo into two joint...
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- Joint cost allocation Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of 250 per batch. At the split-off point, one batchproduces 80, 40, and 25 bottles of hand, body, and foot lotion, respectively. After the split-off point,hand lotion is sold immediately for 2.50 per bottle. Body lotion is processed further at an additional cost of 0.25 per bottle and then sold for 5.75 per bottle. Foot lotion is processed further atan additional cost of 0.85 per bottle and then sold for 4.00 per bottle. Assume that body and footlotion could be sold at the split-off point for 3.00 and 3.20 per bottle, respectively. Instructions 1. Using the market value at split-off method, allocate the joint costs of production to each product. 2. Based on the information provided and your answer to part (1), should Lovely LotionInc. continue processing body and foot lotion after the split-off point? 3. Allocate the joint costs of production to each product using the net realizable value method.arrow_forwardJoint Cost Allocation—Net Realizable Value Method Lily’s Lemonade Stand makes three types of lemonade: pure, raspberry, and strawberry. The lemonade is produced through a joint mixing process that costs a total of $30 per batch. One batch produces 32 cups of pure lemonade, 21 cups of strawberry lemonade, and 21 cups of raspberry lemonade. After the split-off point, all three lemonades can be sold for $0.80 per cup, but strawberry and raspberry lemonade can be processed further by adding artificial coloring and flavoring and sold for $0.95 and $1.00 per cup, respectively. It is estimated that these additional processing costs are $0.75 and $1.80 per batch for strawberry and raspberry lemonade, respectively. Allocate the joint costs of production to each product using the net realizable value method. Joint Product Allocation Pure lemonade $ Strawberry lemonade Raspberry lemonade Totals $arrow_forwardJoint Cost Allocation—Physical Units Method Board-It, Inc., produces the following types of 2 × 4 × 10 wood boards: washed, stained, and pressure treated. These products are produced jointly until they are cut. One batch produces 45 washed boards, 35 stained boards, and 20 pressure treated boards. The joint production process costs a total of $710 per batch. Using the physical units method, allocate the joint production cost to each product. Round your answers to two decimal places.arrow_forward
- Joint cost allocation McKenzies Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process thatcosts 30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-offpoint. Each product is processed further after the split-off point, but the market value of a bottle ofany of the flavors at this point is estimated to be 1.25 per bottle. The additional processing costsof morning glory, snowflake sparkle, and sea breeze hand soap are 10.50, 0.55, and 0.60 perbottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for2.00, 2.20, and 2.40 per bottle, respectively. Instructions 1. Using the net realizable value method, allocate the joint costs of production to each product. 2. Explain why McKenzies Soap Sensations, Inc., always chooses to process each varietyof hand soap beyond the split-off point. 3. If demand for all products was the same, which product should McKenzies Soap Sensations, Inc., produce in the highest quantity?arrow_forwardStrawberry Sweet Company makes a variety of jams and jellies. During June, 55,000 gallons of strawberry mash was processed at a joint cost of $40,000. This produced 42,000 gallons of preserve-grade mix and 4,000 gallons of Strawberry juice for jelly. The juice could be processed further into energy drinks, and the preserve mix could be processed further into ice cream flavoring. Information on these items is shown: A. Assume that the joint cost is allocated to the products based on the physical quantity of output of each product. How much joint cost should be assigned to each product? B. How much joint cost should be assigned to each product if the relative sales value allocation method is used? C. Which products should be processed further?arrow_forwardTucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000-gallon drums for 2.000. Processing costs are 3,000 to process the 1,000 gallons of Duointo 800 gallons of Big and 200 gallons of Mini. The selling price is 9 per gallon for Big and4 per gallon for Mini. If the physical units method is used to allocate joint costs to the finalproducts, the total cost allocated to produce Mini is: a. 500. b. 4,000. c. 1,000. d. 4,500.arrow_forward
- Joint cost allocation Rosies Roses produces three colors of roses: red, white, and peach. The roses are produced jointly in the same garden, and aggregately cost a total of 110 per harvest. One harvest produces 80 redroses, 70 white roses, and 50 peach roses. Rosie also noted that the peach roses require a fertilizer that is m ice as expensive as the fertilizer required by the white and red roses. However, due to the structure of the shared garden space, the more expensive fertilizer is used for all flower types in ajoint production process. Instructions 1. Using the physical units method, allocate the joint costs of production to each product. 2. Using the weighted average method, allocate the joint costs of production to each product. 3. Is the cost of the type of fertilizer required by each type of rose a good weight factor?arrow_forwardJoint-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. Q. Allocate the joint cost to the soy cookies and the Soyola using the following: a. Sales value at splitoff method b. NRV methodarrow_forwardJoint Cost Allocation—Market Value at Split-off Method Sugar Sweetheart, Inc., jointly produces raw sugar, granulated sugar, and caster sugar. After the split-off point, raw sugar is immediately sold for $0.20 per pound, while granulated and caster sugar are processed further. The market value of the granulated sugar and caster sugar is estimated to both be $0.25 at the split-off point. One batch of joint production costs $1,640 and yields 3,000 pounds of raw sugar, 3,600 pounds of granulated sugar, and 2,000 pounds of caster sugar at the split-off point. Allocate the joint costs of production to each product using the market value at split-off method. Joint Product Allocation Raw sugar $fill in the blank 1 Granulated sugar fill in the blank 2 Caster sugar fill in the blank 3 Totals $fill in the blank 4arrow_forward
- Joint Cost Allocation-Market Value at Split-off Method Gripturn Inc. produces two different styles of door handles, standard and curved. The door handles go through a joint production molding process costing $28,000 per batch and producing 2,000 standard door handles and 1,000 curved door handles at the split-off point. Both door handles undergo additional production processes after the split-off point, but could be sold at that point: the standard style for $10 per door handle and the curved style for $5 per door handle. Determine the amount of joint production costs allocated to each style of door handle using the market value at split-off method. Joint Product Standard door handle Curved door handle Totals Feedback Allocationarrow_forwardJoint-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. Q.Should NSP have processed each of the products further? What effect does the allocation method have on this decision?arrow_forwardRequired information (The following information applies to the questions displayed below) Breakfasttime Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows. Quantity at Split-off Point 12,700 kilograns 8,700 kilograns Sales Peice per Kilogram 56.70 8.20 Cereal Joint Cost 597, 000 Yumnies Crumnies Breakfasttime Cereal Company has an opportunity to process its Crummies further into a mulch for ornamental shrubs The additional processing operation costs $2.20 per kilogram, and the mulch will sell for $14.00 per kilogram. 2. Suppose the company does process Crummies into the mulch. Use the net-realizable-value method to allocate the joint production cost between the mulch and the Yummies. (Round intermediate calculations of "Relative Proportions" to 3 decimal places and final answers to the nearest dollar amount.) Answer is complete but not entirely correct. Allocation of Joint Cost Yummies 57,521 8 Mulch 44,237 Oarrow_forward
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