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 16.25E
Alternative methods of joint-cost allocation, ending inventories. The Cook Company operates a simple chemical process to convert a single material into three separate items, referred to here as X, Y, and Z. All three end products are separated simultaneously at a single splitoff point.
Products X and Y are ready for sale immediately upon splitoff without further processing or any other additional costs. Product Z, however, is processed further before being sold. There is no available market price for Z at the splitoff point.
The selling prices quoted here are expected to remain the same in the coming year. During 2017, the selling prices of the items and the total amounts sold were as follows:
- X—68 tons sold for $1,200 per ton
- Y—480 tons sold for $900 per ton
- Z—672 tons sold for $600 per ton
The total joint
There were no beginning inventories of X, Y, or Z. At the end of the year, the following inventories of completed units were on hand: X, 132 tons; Y, 120 tons; Z, 28 tons. There was no beginning or ending work in process.
- 1. Compute the cost of inventories of X, Y, and Z for balance sheet purposes and the cost of goods sold for income statement purposes as of December 31, 2017, using the following joint-cost-allocation methods:
Required
- a. NRV method
- b. Constant gross-margin percentage NRV method
- 2. Compare the gross-margin percentages for X, Y, and Z using the two methods given in requirement 1.
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Double Company produces three products - DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at
the split-off point or processed further. Additional processing requires no special facilities, and production costs of further
processing are entirely variable and traceable to the products involved. Key information about Double's production, sales,
and costs follows.
Units Sold
Price (after additional processing)
Separable Processing cost
Units Produced
Total Joint Cost
Sales Price at Split-off
DBB-1
18,000
$ 65
$ 130,000
18,000
$25
DBB-2
27,000
$50
$ 64,000
27,000
$ 35
The amount of joint costs allocated to product DBB-1 using the physical measure method is:
DBB-3
39,000
$75
$ 86,000
39,000
$ 55
Total
84,000
$ 280,000.
84,000
$ 3,700,000
Marin Products produces three products - DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further.
Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key
information about Marin's production, sales, and costs follows.
Units Sold
Price (after addt'l processing)
Separable Processing cost
Units Produced
Total Joint Cost
Sales Price at Split-off
$
DBB-1
11,000
50
$282,000
11,000
$
$
DBB-2
17,000
20 $
45 $
DBB-3
24,000
70
30 $
$114,000 $169,000 $ 565,000
17,000 24,000
52,000
$3,200,000
Total
50
52,000
The amount of joint costs allocated to product DBB-1 using the net realizable value method is (calculate all ratios and percentages to 2 decimal places, for
example 33.33%, and round all dollar amounts to the nearest whole dollar):
Double Company produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Double's production, sales, and costs follows.
DBB-1
DBB-2
DBB-3
Total
Units Sold
19,800
29,700
41,700
91,200
Price (after additional processing)
$ 65
$ 50
$ 75
Separable Processing cost
$ 136,125
$ 54,450
$ 76,450
$ 267,025
Units Produced
19,800
29,700
41,700
91,200
Total Joint Cost
$ 4,360,000
Sales Price at Split-off
$ 25
$ 35
$ 55
The amount of joint costs allocated to product DBB-3 using the net realizable value method is:
Multiple Choice
$2,361,764.
$1,228,747.
$1,107,364.
$1,150,875.
$890,872.
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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