1. How much of the joint costs per batch will be allocated to methanol and to turpentine, assuming that joint costs are allocated based on the number of gallons at splitoff point? 2. If joint costs are allocated on an NRV basis, how much of the joint costs will be allocated to methanol and to turpentine? 3. Prepare product-line income statements per batch for requirements 1 and 2. Assume no beginning or ending inventories. 4. The company has discovered an additional process by which the methanol (wood alcohol) can be made into a pleasant-tasting alcoholic beverage. The selling price of this beverage would be $55 a gal- lon. Additional processing would increase separable costs $12 per gallon (in addition to the $4 per gal- lon separable cost required to yield methanol). The company would have to pay excise taxes of 20% on the selling price of the beverage. Assuming no other changes in cost, what is the joint cost applicable to the wood alcohol (using the NRV method)? Should the company pra Show your computations. Required the alcoholic beverage?
1. How much of the joint costs per batch will be allocated to methanol and to turpentine, assuming that joint costs are allocated based on the number of gallons at splitoff point? 2. If joint costs are allocated on an NRV basis, how much of the joint costs will be allocated to methanol and to turpentine? 3. Prepare product-line income statements per batch for requirements 1 and 2. Assume no beginning or ending inventories. 4. The company has discovered an additional process by which the methanol (wood alcohol) can be made into a pleasant-tasting alcoholic beverage. The selling price of this beverage would be $55 a gal- lon. Additional processing would increase separable costs $12 per gallon (in addition to the $4 per gal- lon separable cost required to yield methanol). The company would have to pay excise taxes of 20% on the selling price of the beverage. Assuming no other changes in cost, what is the joint cost applicable to the wood alcohol (using the NRV method)? Should the company pra Show your computations. Required the alcoholic beverage?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 10CE: A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each...
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Alternative joint-cost-allocation methods, further process decision. The Tempura spirits Company produces two products – methanol (wood alcohol) and turpentine—by a joint process. Joint costs amount to $ 124,000 per batch of output. Each batch totals 9,500 gallons:25% methanol and 75% turpentine. Both products are processed further without gain or loss in volume. Separable
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