LO.3 (Approximated net realizable value method) The Scent of Money makes three products that can be sold at split-off or processed further and then sold. The joint cost for April 2010 is $1,080,000. Separate Cost after Bottles of Output Sales Price at Final Sales Product Split-Off Split-Off Price Perfume 20,000 $7.00 $2.50 $16.50 Eau de toilette 32,000 500 1.50 13.00 Body splash 28,000 500 2.00 12.00 The number of ounces in a bottle of cach product is: perfume, 1; eau de toilette, 2; and body splash, 3. Assume that all products are processed further after split-off. a. Allocate the joint cost based on the number of bottles, weight, and approximated net realizable values at split-off. (Round to the nearest whole percentage.) b. Assume that all products are processed further and completed. At the end of the period, the inventories are as follows: perfume, 600 bottles; eau de toilette, 1,600 bottles; and body splash, 1,680 bottles. Determine the values of the inventories based on answers obtained in (a). (Round per-unit costs to the nearest cent.) c. Do you see any problems with the allocation based on approximated net realizable value?

LO.3 (Approximated net realizable value method) The Scent of Money makes three products that can be sold at split-off or processed further and then sold. The joint cost for April 2010 is $1,080,000. Separate Cost after Bottles of Output Sales Price at Final Sales Product Split-Off Split-Off Price Perfume 20,000 $7.00 $2.50 $16.50 Eau de toilette 32,000 500 1.50 13.00 Body splash 28,000 500 2.00 12.00 The number of ounces in a bottle of cach product is: perfume, 1; eau de toilette, 2; and body splash, 3. Assume that all products are processed further after split-off. a. Allocate the joint cost based on the number of bottles, weight, and approximated net realizable values at split-off. (Round to the nearest whole percentage.) b. Assume that all products are processed further and completed. At the end of the period, the inventories are as follows: perfume, 600 bottles; eau de toilette, 1,600 bottles; and body splash, 1,680 bottles. Determine the values of the inventories based on answers obtained in (a). (Round per-unit costs to the nearest cent.) c. Do you see any problems with the allocation based on approximated net realizable value?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.16E

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