EXERCISE 6-13 Sell or Process Further Decision L06-7 Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Mate- rial and processing costs total $60,000 per ton, one-fourth of which is allocated to product X15. Seven thousand units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $9 each, or processed further at a total cost of $9,500 and then sold for $12 each. Required: What is the financial advantage (disadvantage) of further processing product X15? Should product X15 be processed further or sold at the split-off point? 1. 2.

EXERCISE 6-13 Sell or Process Further Decision L06-7 Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Mate- rial and processing costs total $60,000 per ton, one-fourth of which is allocated to product X15. Seven thousand units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $9 each, or processed further at a total cost of $9,500 and then sold for $12 each. Required: What is the financial advantage (disadvantage) of further processing product X15? Should product X15 be processed further or sold at the split-off point? 1. 2.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 13-13 (Algo) Sell or Process Further Decision [LO13-7] Wexpro, Incorporated, produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $69,000 per ton, one-fourth of which is allocated to product X15. Seven thousand five hundred units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $12 each, or processed further at a total cost of $9,200 and then sold for $18 each. Required: 1. What is the financial advantage (disadvantage) of further processing product X15? 2. Should product X15 be processed further or sold at the split-off point?
Problem 5 (9-13 min) Sebastian Company produced and sold 50,000 units of product and is operating at 70% of plant capacity. Unit information about its product is as follows: Sales price $70 Variable manufacturing cost $45 Fixed manufacturing cost ($500,000 ÷ 50,000) 10 55 Profit per unit $15 The company received a proposal from a foreign company to buy 10,000 units of Sebastian Company’s product for $50 per unit. This is a one-time only order and acceptance of this proposal will not affect the company’s regular sales. The president of Sebastian Company is reluctant to accept the proposal because he is concerned that the company will lose money on the special order.…
Question iii) Han products manufacturing 40,000 units of part S-9 each year for use of its production line. A this level of activity, the cost per unit for part S-9 is given as follows : DM - $4.60; DL - $12; VMOH $3.60; FMOH $6. An outside supplier has offered to sell 40,000 units of part S-9 each year to Han products for $25 per part. If Han products accepts this offer, the facilities now being used to manufacturing part S-9 could be rented to another company at an annual rental of $80,000. However. Han products has determined that 2/3 of FMOH being applied to part S-9 would continue even if part S-9 were purchased from the outside supplier. Requirement: iii1. Calculate how much profit will increase/decrease if the outside supplier’s offer is accepted.
Problem 11-75 (Algo) Joint Cost Allocation and Product Profitability (LO 11-7, 8, 9) Prescott Lumber processes logs into grade A and grade B lumber. Logs cost $17,200 per load. The milling process produces 5,000 units of grade A with a market value of $100,800, and 20,000 units of grade B with a market value of 514,400. The cost of the milling process is $22,000 per load. Required: a. If the costs of the logs and the milling process are allocated on the basis of units of output what cost will be assigned to each product? b. If the costs of the logs and the milling process are allocated on the basis of the net realizable value, what cost will be assigned to each product? c-1. How much profit or loss does the grade B lumber provide using the data in this problem and your analysis in requirement (a)? c-2. Is it really possible to determine which product is more profitable? Complete this question by entering your answers in the tabs below. ReqA If the costs of the logs and the milling…
Sell or Process Further Decision Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $60,000 per ton, one-fourth of which is allocated to product X15. Seven thousand units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $9 each, or processed further at a total cost of $9,500 and then sold for $12 each. Required: 1. What is the financial advantage (disadvantage) of further processing product X15? 2. Should product X15 be processed further or sold at the split-off point?
Problem 6 Lucille Inc manufactures a product that gives rise to a by-product called “Robon”. The only cost associated with Robon are additional processing cost of P1.00 for each unit. Lucille accounts for Robon sales first by deducting its separable costs from such sales and then by deducting this net amount from the cost of sales of the major product. For the past year, 2,000 units of Robon were produced which were sold for P3.00 each. Sales revenue and cost of goods sold from the main product were P500,000 and P400,000 respectively. If Lucille changes its method of accounting for Roblon sales by showing the net amount as “other income”, the effect on gross margin would be (increase of decrease of what amount?)
Problem 6 Lucille Inc manufactures a product that gives rise to a by-product called “Robon”. The only cost associated with Robon are additional processing cost of P1.00 for each unit. Lucille accounts for Robon sales first by deducting its separable costs from such sales and then by deducting this net amount from the cost of sales of the major product. For the past year, 2,000 units of Robon were produced which were sold for P3.00 each. Sales revenue and cost of goods sold from the main product were P500,000 and P400,000 respectively. The gross margin after considering the by-product sales and costs would be
PROBLEM 2 Joie Company Manufactures two products R and S, Joie produced 12,000 units of R with an after split-off sales value of P45,000. However, if R were to be processed further, additional cost of P6,000 will be incurred but the sales value will increase to P60,000. Joie produced 6,000 units of S with an after split-off sales value of P30,000. However if S were to be further processed, additional cost of 3,600 will be incurred but sales value will go up to 36,000. Under the relative sales value at split-off approach, the allocation to R from the total product cost is 27,000. What is the total Joint Product cost?
Problem 9 Comely Products manufactures three products R, S and T, in a joint Process. For every ten kilos of raw materials input, the output is five kilos of R, three kilos of S and two kilos of T. During August, 50,000 kilos of raw materials costing P120,000 were processed and completed, with joint conversion costs of P200,000. Conversion costs are to be allocated to the products on the basis of market values. To make the products saleable, further processing which does not require additional raw materials was done at the following costs: Further processing cost Selling Price Product R P30,000 P10.00 Product S P20,000 P12.00 Product T P30,000 P15.00 Assuming that all units are sold, the gross margin on sales for Product S is
Problem 9 Comely Products manufactures three products R, S and T, in a joint Process. For every ten kilos of raw materials input, the output is five kilos of R, three kilos of S and two kilos of T. During August, 50,000 kilos of raw materials costing P120,000 were processed and completed, with joint conversion costs of P200,000. Conversion costs are to be allocated to the products on the basis of market values. To make the products saleable, further processing which does not require additional raw materials was done at the following costs: Further processing cost Selling Price Product R P30,000 P10.00 Product S P20,000 P12.00 Product T P30,000 P15.00 The unit cost of Product R is (round off to two decimal places if needed)
Question 10.4 Big Machines Corp. has two divisions. Division Y manufactures components that can be sold in the external market place or transferred to Division Z for further processing. The following data relate to Division Y's component product. Variable manufacturing costs/unit $925 Fixed costs/unit at capacity $275 Selling price/unit $1,800 The capacity of the plant is 2,500 units per year. Division Z has offered to purchase 350 units from Division Y at a price of $1,600/unit, which is the market price of the component. The manager of Division Y has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%. The Division Y manager also states that additional fixed costs of $195,000 would be required to produce the 350 units. The corporate required rate of return is 18% of assets and the existing asset base in Division Y is $2,500,000. Required: How many units must Division Y sell in order…
Exercise 8-10 Every year Concord Industries manufactures 10,000 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $ 4 Direct labor 9 Variable manufacturing overhead 7 Fixed manufacturing overhead 10 Total $30 Flintrock, Inc., has offered to sell 10,000 units of part 231 to Concord for $32 per unit. If Concord accepts Flintrock’s offer, its freed-up facilities could be used to earn $11,700 in contribution margin by manufacturing part 240. In addition, Concord would eliminate 40% of the fixed overhead applied to part 231.(a) Calculate total relevant cost to make and net cost to buy. Total relevant cost to make $Enter total relevant cost to make in dollars Net relevant cost to buy $Enter net relevant cost to buy in dollars (b) Should Concord accept Flintrock’s offer?Select an option YesNo Click if you would like to Show Work for this question: Open Show Work