Striker Chemical Lab manufactures liquids into three different outputs: Freisa, Bracko, and Pragin. Freisa accounts for 56 percent of the net realizable value at the split-off point, Bracko accounts for 29 percent, and Pragin accounts for the balance. The joint costs total $644,000. If Pragin is accounted for as a by-product, its $74,000 net realizable value at split-off is credited to the joint manufacturing costs by crediting the by-product’s net realizable value as a reduction in the joint costs. Questions: How should management decide whether a product should be sold at splitoff or processed further? Explain for Striker if the sales value at split off method of joint-cost allocation is the best method for generating the information needed to make a decision. What does this mean for the by-product output Pragin?
Striker Chemical Lab manufactures liquids into three different outputs: Freisa, Bracko, and Pragin. Freisa accounts for 56 percent of the net realizable value at the split-off point, Bracko accounts for 29 percent, and Pragin accounts for the balance. The joint costs total $644,000. If Pragin is accounted for as a by-product, its $74,000 net realizable value at split-off is credited to the joint manufacturing costs by crediting the by-product’s net realizable value as a reduction in the joint costs. Questions: How should management decide whether a product should be sold at splitoff or processed further? Explain for Striker if the sales value at split off method of joint-cost allocation is the best method for generating the information needed to make a decision. What does this mean for the by-product output Pragin?
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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Striker Chemical Lab manufactures liquids into three different outputs: Freisa, Bracko, and Pragin. Freisa accounts for 56 percent of the net realizable value at the split-off point, Bracko accounts for 29 percent, and Pragin accounts for the balance. The joint costs total $644,000. If Pragin is accounted for as a by-product, its $74,000 net realizable value at split-off is credited to the joint
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- How should management decide whether a product should be sold at splitoff or processed further?
- Explain for Striker if the sales value at split off method of joint-cost allocation is the best method for generating the information needed to make a decision. What does this mean for the by-product output Pragin?
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