Crane's woodworking business produces two products from its joint process: one main product (sanded and finished trim pieces) and one by-product (sawdust/shavings). The joint process has a cost of $31,000, which results in trim pieces worth $47,000 and sawdust/shavings that can be sold for $2,800. If Crane uses the production method to account for by-products, determine how much of the joint process cost will be allocated to each product. In other words, how much inventory cost will be recorded for each product By-product Main product Allocated joint costs $ $

Crane's woodworking business produces two products from its joint process: one main product (sanded and finished trim pieces) and one by-product (sawdust/shavings). The joint process has a cost of $31,000, which results in trim pieces worth $47,000 and sawdust/shavings that can be sold for $2,800. If Crane uses the production method to account for by-products, determine how much of the joint process cost will be allocated to each product. In other words, how much inventory cost will be recorded for each product By-product Main product Allocated joint costs $ $

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter20: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 4CMA: Eagle Brand Inc. produces two products as follows: Eagle Brand has 1,000 lbs. of raw materials that...

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Oakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of Beracyl in a joint production process, incurring 250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced. Mononate and Beracyl can each be sold at the split-off point in a semifinished state or, alternatively, processed further. Additional data about the two products are as follows: An assistant in the companys cost accounting department was overheard saying ...that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is simply not worth the effort. Which of the following strategies should be recommended for Oakes?
Tucariz 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.
Blakes Blacksmith Co. produces two types of shotguns, a 12-gauge and 20-gauge. The shotguns are made through a joint production process that ultimately produces 30 12-gauge shotguns and 20 20-gauge shotguns and costs a total of 4,000 per batch. After the split-off point, each type of shotgun goes through an additional crafting process before it is sold. The additional production process of the 12-gauge shotgun costs 30 per gun, after which it is sold for 180 per gun. The additional production process of the 20-gauge shotgun costs 25 per gun, after which it is sold for 150 per gun. Determine the amount of joint production costs allocated to each type of shotgun using the 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.
Pacheco, Inc., produces two products, overs and unders, in a single process. The joint costs of this process were 50,000, and 14,000 units of overs and 36,000 units of unders were produced. Separable processing costs beyond the split-off point were as follows: overs, 18,000; unders, 23,040. Overs sell for 2.00 per unit; unders sell for 3.14 per unit. Required: 1. Allocate the 50,000 joint costs using the estimated net realizable value method. 2. Suppose that overs could be sold at the split-off point for 1.80 per unit. Should Pacheco sell overs at split-off or process them further? Show supporting computations.
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Taylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio and Maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and Maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year, Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2,000 units of Maslimpio. The detail of each products unit contribution margin is as follows: Taylor Company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6,000 quarts it planned to use in the coming years production. There is no other source of the material. Required: 1. Compute the total contribution margin that the company would earn if it could import the 6,000 quarts of the material. 2. Determine the optimal usage of the companys inventory of 6,000 quarts of the material. Compute the total contribution margin for the product mix that you recommend. 3. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year. a. Formulate the linear programming problem faced by Taylor Company. To do so, you must derive mathematical expressions for the objective function and for the materials and labor constraints. b. Solve the linear programming problem using the graphical approach. c. Compute the total contribution margin produced by the optimal mix.
Venezuela Oil Inc. transports crude oil to its refinery where it is processed into main products gasoline, kerosene, and diesel fuel, and by-product base oil. The base oil is sold at the split-off point for $1,000,000 of annual revenue, and the joint processing costs to get the crude oil to split-off are $10,000,000. Additional information includes: Required: Determine the allocation of joint costs using the net realizable value method, rounding the sales value percentages to the nearest tenth of a percent. (Hint: Reduce the amount of the joint costs to be allocated by the amount of the by-product revenue.)
Adirondack Bat Co. processes rough timber to obtain three grades of lumber, A, B, and C that are then made into baseball bats. The company allocates joint costs to the joint products on the basis of the sales value at the split-off point. During the month of May, Adirondack incurred total joint production costs of $300,000 in producing the following: Make the journal entry to transfer the finished lumber to separate work in process inventory accounts for each product. What would be the allocation of the joint costs if the company were to use the physical measure method?
LeMoyne Manufacturing Inc.’s joint cost of producing 2,000 units of Product X, 1,000 units of Product Y, and 1,000 units of Product Z is $50,000. The unit sales values of the three products at the split-off point are Product X–$30, Product Y–$100, and Product Z–$90. Ending inventories include 200 units of Product X, 300 units of Product Y, and 100 units of Product Z. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their sales values at split-off. Assume that Product Z can be sold for $120 a unit if it is processed after split-off at a cost of $10 a unit. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their net realizable values.
Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows: The shaper is available for 120 hours, and the grinder for 110 hours. No more than 200 units of component 3 can be sold, but up to 1,000 units of each of the other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The profit contributions for components 1, 2, and 3 are 8, 6, and 9, respectively. a. Formulate and solve for the recommended production quantities. b. What are the objective coefficient ranges for the three components? Interpret these ranges for company management. c. What are the right-hand-side ranges? Interpret these ranges for company management. d. If more time could be made available on the grinder, how much would it be worth? e. If more units of component 3 can be sold by reducing the sales price by 4, should the company reduce the price?