COST ACCOUNTING
16th Edition
ISBN: 9781323694008
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 16, Problem 16.24E
Alternative joint-cost-allocation methods, further-process decision. The Tempura Spirits Company produces two products—methanol (wood alcohol) and turpentine—by a joint process. Joint costs amount to $124,000 per batch of output. Each batch totals 9,500 gallons: 25% methanol and 75% turpentine. Both products are processed further without gain or loss in volume. Separable
- 1. How much of the joint costs per batch will be allocated to methanol and to turpentine, assuming that joint costs are allocated based on the number of gallons at splitoff point?
Required
- 2. If joint costs are allocated on an NRV basis, how much of the joint costs will be allocated to methanol and to turpentine?
- 3. Prepare product-line income statements per batch for requirements 1 and 2. Assume no beginning or ending inventories.
- 4. The company has discovered an additional process by which the methanol (wood alcohol) can be made into a pleasant-tasting alcoholic beverage. The selling price of this beverage would be $55 a gallon. Additional processing would increase separable costs $12 per gallon (in addition to the $4 per gallon separable cost required to yield methanol). The company would have to pay excise taxes of 20% on the selling price of the beverage. Assuming no other changes in cost, what is the joint cost applicable to the wood alcohol (using the NRV method)? Should the company produce the alcoholic beverage? Show your computations.
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Alternative joint-cost-allocation methods, further process decision. The Tempura spirits Company produces two products – methanol (wood alcohol) and turpentine—by a joint process. Joint costs amount to $ 124,000 per batch of output. Each batch totals 9,500 gallons:25% methanol and 75% turpentine. Both products are processed further without gain or loss in volume. Separable processing costs are methanol,$4 per gallon, and turpentine,$2 per gallon. Methanol sells for $22 per gallon. Turpentine sells for $16 per gallon.
Alternative joint-cost-allocation methods, further-process decision. The Tempura Spirits Company produces two products —methanol (wood alcohol) and turpentine—by a joint process. Joint costs amount to $124,000 per batch of output. Each batch totals 9,500 gallons: 25% methanol and 75% turpentine. Both products are processed further without gain or loss in volume. Separable processing costs are methanol, $4 per gallon, and turpentine, $2 per gallon. Methanol sells for $22 per gallon. Turpentine sells for $16 per gallon.
Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs on the basis of sales value at split-off. Processing 4,300 gallons of product A and 1,400 gallons of product B to the split-off point costs $5,200. The sales value at split-off is $3.00 per gallon for product A and $21.50 per gallon for product B. Product B requires additional separable processing beyond the split-off point at a cost of $2.80 per gallon before it can be sold at a price of $34 per gallon.
Required:
What is the company’s cost to produce 1,400 gallons of product B?
Question 2.
Webster Company produces 30,000 units of product A, 25,000 units of product B, and 16,500 units of product C from the same manufacturing process at a cost of $405,000. A and B are joint products, and C is regarded as a by-product. The unit selling prices of the products are $25 for A, $10 for B, and $2 for C. None of the products requires separable processing. Of the units produced, Webster…
Chapter 16 Solutions
COST ACCOUNTING
Ch. 16 - Give two examples of industries in which joint...Ch. 16 - What is a joint cost? What is a separable cost?Ch. 16 - Distinguish between a joint product and a...Ch. 16 - Why might the number of products in a joint-cost...Ch. 16 - Provide three reasons for allocating joint costs...Ch. 16 - Why does the sales value at splitoff method use...Ch. 16 - Prob. 16.7QCh. 16 - Distinguish between the sales value at splitoff...Ch. 16 - Give two limitations of the physical-measure...Ch. 16 - How might a company simplify its use of the NRV...
Ch. 16 - Why is the constant gross-margin percentage NRV...Ch. 16 - Managers must decide whether a product should be...Ch. 16 - Prob. 16.13QCh. 16 - Describe two major methods to account for...Ch. 16 - Why might managers seeking a monthly bonus based...Ch. 16 - Prob. 16.16MCQCh. 16 - Joint costs of 8,000 are incurred to process X and...Ch. 16 - Houston Corporation has two products, Astros and...Ch. 16 - Dallas Company produces joint products, TomL and...Ch. 16 - Earls Hurricane Lamp Oil Company produces both A-1...Ch. 16 - Joint-cost allocation, insurance settlement....Ch. 16 - Joint products and byproducts (continuation of...Ch. 16 - Net realizable value method. Sweeney Company is...Ch. 16 - Alternative joint-cost-allocation methods,...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Prob. 16.26ECh. 16 - Joint-cost allocation, sales value, physical...Ch. 16 - Joint-cost allocation: Sell immediately or process...Ch. 16 - Accounting for a main product and a byproduct....Ch. 16 - Joint costs and decision making. Jack Bibby is a...Ch. 16 - Joint costs and byproducts. (W. Crum adapted)...Ch. 16 - Methods of joint-cost allocation, ending...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Comparison of alternative joint-cost-allocation...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Joint-cost allocation. SW Flour Company buys 1...Ch. 16 - Further processing decision (continuation of...Ch. 16 - Joint-cost allocation with a byproduct. The...Ch. 16 - Byproduct-costing journal entries (continuation of...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Prob. 16.41PCh. 16 - Prob. 16.42PCh. 16 - Methods of joint-cost allocation, comprehensive....
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