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Joint-cost allocation, insurance settlement. Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2017 is as follows:
Parts | Pounds of Product | Wholesale Selling Price per Pound When Production Is Complete |
Breasts | 100 | $0.55 |
Wings | 20 | 0.20 |
Thighs | 40 | 0.35 |
Bones | 80 | 0.10 |
Feathers | 10 | 0.05 |
Joint cost of production in July 2017 was $50.
A special shipment of 40 pounds of breasts and 15 pounds of wings has been destroyed in a fire. Quality Chicken’s insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Quality Chicken to use a joint-cost-allocation method. The splitoff point is assumed to be at the end of the production process.
- 1. Compute the cost of the special shipment destroyed using the following:
Required
- a. Sales value at splitoff method
- b. Physical-measure method (pounds of finished product)
- 2. What joint-cost-allocation method would you recommend Quality Chicken use? Explain.
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Chapter 16 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
- Joint-cost allocation. SW Flour Company buys 1 input of standard flour and refines it using a special sifting process to 3 cups of baking flour and 9 cups of bread flour. In May 2017, SW bought 12,000 inputs of flour for $89,000. SW spent another $47,800 on the special sifting process. The baking flour can be sold for $3.60 per cup and the bread flour for $4.80 per cup. SW puts the baking flour through a second process so it is super fine. This costs an additional $1.00 per cup of baking flour and the process yields ½ cup of super-fine baking flour for every one cup of baking flour used. The super-fine baking flour sells for $9.60 per cup. SW Flour Company has decided that their bread flour may sell better if it was marketed for gourmet baking and sold with infused spices. This would involve additional cost for the spices of $0.80 per cup. Each cup could be sold for $5.50. Q. If SW uses the sales value at splitoff method, what combination of products should SW sell to maximize profits?arrow_forwardJoint-cost allocation. SW Flour Company buys 1 input of standard flour and refines it using a special sifting process to 3 cups of baking flour and 9 cups of bread flour. In May 2017, SW bought 12,000 inputs of flour for $89,000. SW spent another $47,800 on the special sifting process. The baking flour can be sold for $3.60 per cup and the bread flour for $4.80 per cup. SW puts the baking flour through a second process so it is super fine. This costs an additional $1.00 per cup of baking flour and the process yields ½ cup of super-fine baking flour for every one cup of baking flour used. The super-fine baking flour sells for $9.60 per cup. Q. Some claim that the sales value at splitoff method is the best method to use. Discuss the logic behind this claimarrow_forwardJoint-cost allocation. SW Flour Company buys 1 input of standard flour and refines it using a special sifting process to 3 cups of baking flour and 9 cups of bread flour. In May 2017, SW bought 12,000 inputs of flour for $89,000. SW spent another $47,800 on the special sifting process. The baking flour can be sold for $3.60 per cup and the bread flour for $4.80 per cup. SW puts the baking flour through a second process so it is super fine. This costs an additional $1.00 per cup of baking flour and the process yields ½ cup of super-fine baking flour for every one cup of baking flour used. The super-fine baking flour sells for $9.60 per cup. SW Flour Company has decided that their bread flour may sell better if it was marketed for gourmet baking and sold with infused spices. This would involve additional cost for the spices of $0.80 per cup. Each cup could be sold for $5.50. Q.If SW uses the physical-measure method, what combination of products should SW sell to maximize profits?arrow_forward
- 17-21 JOINT-COST ALLOCATION, INSURANCE SETTLEMENT. Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2020 follows: Parts Wholesale Selling Price per Pound When Pounds of Product Breasts 100 Wings 20 Thighs 40 Bones 80 Feathers 10 Production Is Complete $0.55 0.20 0.35 0.10 0.05 Joint cost of production in July 2020 was $50. A special shipment of 40 pounds of breasts and 15 pounds of wings has been destroyed in a fire. Quality Chicken's insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Quality Chicken to use a joint-cost-allocation method. The splitoff point is assumed to be at the end of the production process. Required 1. Compute the cost of the special shipment destroyed using the following: a. Sales value at splitoff method b. Physical-measure method (pounds of finished product) 2. What joint-cost-allocation method would you recommend…arrow_forwardOrganic Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2017 is as follows: Joint cost of production in July 2017 was $100. A special shipment of 75pounds of breasts and 15 pounds of wings has been destroyed in a fire. Organic Chicken's insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Organic Chicken to use a joint-cost-allocation method. The splitoff point is assumed to be at the end of the production process. Read the requirements2. Requirement 1a. Compute the cost of the special shipment destroyed using the sales value at splitoff method. Complete the table below to assist you. (Round the weighting to three decimal places and the allocated costs per pound to four decimal places. Round all other amounts to the nearest cent.) Breast Wings Thighs Bones Feathers Total Pounds of product 200 50…arrow_forwardTreaty Treat, Inc., purchases soybeans and processes them into the following three types of products: dog biscuits, cat food, and chicken feed. These products are the result of a joint process. In a typical month, there are total joint costs of $191,000. The dog biscuits and chicken feed are sold after being pressed into various shapes without further processing by TreatyTreat. (i.e. the fully- processed sales price is the same as the sales price at the point of split-off.) The cat food must be further mixed with vitamins. If the cat food spoils during the vitamin-adding process, the product can still be sold for fertilizer at $2.70 per unit. (Hint, this would be the sales value of the cat food at the split-off point.) The additional processing of cat food costs TreatyTreat $13,700 per month. Product yield and average sales value on a per-unit basis from the joint processes are as follows: Monthly Fully Processed Sales Price $9 Product Dog Biscuits Cat Food Chicken Feed Output 53,000…arrow_forward
- Rogers Rods & Reels Ltd. Rogers Rods & Reels Ltd. manufactures and sells various types of fishing equipment. At the end of 2011, Rogers had estimated for the production and sale of 15,000 bass fishing rods. Each rod has a standard calling for 1.5 pounds of direct material at a standard rate of $8.00 per pound and 15 minutes of direct labor time at a standard rate of $.18 per minute. During 2012, Rogers actually produced and sold 16,000 rods. These 16,000 rods had an actual direct materials cost of $179,200 (25,600 pounds at $7.00 per pound) and an actual direct labor cost of $44,800 (224,000 minutes at $.20 per minute). Each rod sells for $50. Refer to the Rogers Rods & Reels Ltd. information above. What is Rogers' net operating income based on a flexible budget? 579,500 564,800 O 576,000 590,000arrow_forwardHarrow Labs produces a drug used for the treatment of arthritis. The drug is produced in batches. i (Click the icon to view additional information.) In March, Harrow, which had no opening inventory, processed one batch of chemicals. It sold 1,500 gallons of product for human use and 400 gallons of the veterinarian product. Harrow uses the net realizable value method for allocating joint production costs. Read the requirements. Requirement 1. How much in joint costs does Harrow allocate to each product? (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.) Joint costs allocated to human product Joint costs allocated to veterinarian product Requirements 1. How much in joint costs does Harrow allocate to each product? 2. Compute the cost of ending inventory for each of Harrow's products. 3. If Harrow were to use the constant gross-margin percentage NRV method instead, how would it allocate its joint costs? 4. Calculate the gross…arrow_forward(Physical measure joint cost allocation) Powisett Farms Dairy began opera-tions at the start of May 2010. Powisett Farms operates a fl eet of trucks to gather whole milk from local farmers. The whole milk is then separated into two joint products: skim milk and cream. Both products are sold at the split-off point to dairy wholesalers. For May, the firm incurred the following joint costs:Whole milk purchase cost $400,000Direct labor costs 180,000Overhead costs 292,000Total product cost $872,000During May, the fi rm processed 2,000,000 gallons of whole milk, producing 1,555,500 gallons of skim milk and 274,500 gallons of cream. The remaining gallons of the whole milk were lost during processing. There was no Raw Material or Work in Process Inventory at the end of May.After the joint process, the skim milk and cream were separately processed at costs,respectively, of $67,660 and $83,310. Of the products produced, Powisett Farms Dairy sold 1,550,000 gallons of skim milk for $1,472,500 and…arrow_forward
- Premium Candy Inc. is a producer of premium chocolate based in Palo Alto. For 2017, the trucking fleet had a practical capacity of 85 round-trips between the Palo Alto plant and the two suppliers. It recorded the following information: Premium Candy Inc. decides to examine the effect of using the dual-rate method for allocating truck costs to each round-trip. Read the requirements4. Requirement 1. Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division? Dark chocolate Milk chocolate Variable costs Fixed costs Total costs Requirement 2. From the viewpoint of the dark chocolate…arrow_forward(Physical measure joint cost allocation) Powisett Farms Dairy began opera-tions at the start of May 2010. Powisett Farms operates a fleet of trucks to gather whole milk from local farmers. The whole milk is then separated into two joint products: skim milk and cream. Both products are sold at the split-off point to dairy wholesalers. For May, the firm incurred the following joint costs:Whole milk purchase cost $400,000Direct labor costs 180,000Overhead costs 292,000Total product cost $872,000During May, the firm processed 2,000,000 gallons of whole milk, producing 1,555,500 gallons of skim milk and 274,500 gallons of cream. The remaining gallons of the whole milk were lost during processing. There was no Raw Material or Work in Process Inventory at the end of May.After the joint process, the skim milk and cream were separately processed at costs, respectively, of $67,660 and $83,310. Of the products produced, Powisett Farms Dairy sold 1,550,000 gallons of skim milk for $1,472,500 and…arrow_forwardPet Products Inc. manufactures two products, cat bowls and dog bowls, from a joint process. Cat bowls are allocated 50% of the total joint costs of $20,000. There are 1,000 cat bowls produced and 1,000 dog bowls produced each year. Cat Bowls can be sold at the split-off point for $12 per unit, or they can be processed further into an extra fancy cat bowl for additional processing costs of $4,970 and sold for $16 each. What is the difference in operating income between processing the cat bowls further versus selling them off at the split-off point? If income is higher by processing the cat bowls further, input your number as a positive number. If income is lower by processing the cat bowls further, input your number as a negative number.arrow_forward
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
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