The Sun-Kissed Company manufactures two skin-care lotions, Soft Skin and Silken Skin, out of a joint process. The joint (common) costs incurred are $410,000 for a standard production run that generates 165,000 gallons of Soft Skin and 120,000 gallons of Silken Skin. Additional processing costs beyond the split-off point are $1.40 per gallon for Soft Skin and $0.90 per gallon for Silken Skin. Soft Skin sells for $2.40 per gallon while Silken Skin sells for $3.90 per gallon. The Best Eastern Hotel chain has asked the Sun-Kissed Company to supply it with 240,000 gallons of Silken Skin at a price of $3.65 per gallon. Best Eastern plans to have the Silken Skin bottled in 1.5-ounce personal-use containers that are supplied in each of its hotel rooms as part of the complimentary personal products for guest use. If Sun-Kissed accepts the order, it will save $0.05 per gallon in packaging of Silken Skin. There is sufficient excess capacity in Sun-Kissed's production system to handle just one more production run in order to have sufficient Silken Skin for this special order. However, the nature of the joint process always results in 165,000 gallons of Soft Skin and 120,000 gallons of Silken Skin. Also, the market for Soft Skin is saturated; hence, any additional sales of Soft Skin would take place at a price of $1.60 per gallon. a. What is the profit normally earned on one production run of Soft Skin and Silken Skin?
The Sun-Kissed Company manufactures two skin-care lotions, Soft Skin and Silken Skin, out of a joint process. The joint (common) costs incurred are $410,000 for a standard production run that generates 165,000 gallons of Soft Skin and 120,000 gallons of Silken Skin. Additional processing costs beyond the split-off point are $1.40 per gallon for Soft Skin and $0.90 per gallon for Silken Skin. Soft Skin sells for $2.40 per gallon while Silken Skin sells for $3.90 per gallon. The Best Eastern Hotel chain has asked the Sun-Kissed Company to supply it with 240,000 gallons of Silken Skin at a price of $3.65 per gallon. Best Eastern plans to have the Silken Skin bottled in 1.5-ounce personal-use containers that are supplied in each of its hotel rooms as part of the complimentary personal products for guest use. If Sun-Kissed accepts the order, it will save $0.05 per gallon in packaging of Silken Skin. There is sufficient excess capacity in Sun-Kissed's production system to handle just one more production run in order to have sufficient Silken Skin for this special order. However, the nature of the joint process always results in 165,000 gallons of Soft Skin and 120,000 gallons of Silken Skin. Also, the market for Soft Skin is saturated; hence, any additional sales of Soft Skin would take place at a price of $1.60 per gallon. a. What is the profit normally earned on one production run of Soft Skin and Silken Skin?
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 27E: Pacheco, Inc., produces two products, overs and unders, in a single process. The joint costs of this...
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Transcribed Image Text:The Sun-Kissed Company manufactures two skin-care lotions, Soft Skin and Silken Skin, out of a joint process. The joint (common) costs incurred are
$410,000 for a standard production run that generates 165,000 gallons of Soft Skin and 120,000 gallons of Silken Skin. Additional processing costs
beyond the split-off point are $1.40 per gallon for Soft Skin and $0.90 per gallon for Silken Skin. Soft Skin sells for $2.40 per gallon while Silken Skin
sells for $3.90 per gallon.
The Best Eastern Hotel chain has asked the Sun-Kissed Company to supply it with 240,000 gallons of Silken Skin at a price of $3.65 per gallon. Best
Eastern plans to have the Silken Skin bottled in 1.5-ounce personal-use containers that are supplied in each of its hotel rooms as part of the
complimentary personal products for guest use.
If Sun-Kissed accepts the order, it will save $0.05 per gallon in packaging of Silken Skin. There is sufficient excess capacity in Sun-Kissed's production
system to handle just one more production run in order to have sufficient Silken Skin for this special order. However, the nature of the joint process
always results in 165,000 gallons of Soft Skin and 120,000 gallons of Silken Skin. Also, the market for Soft Skin is saturated; hence, any additional sales
of Soft Skin would take place at a price of $1.60 per gallon.
a. What is the profit normally earned on one production run of Soft Skin and Silken Skin?
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