Joint costs and byproducts. (W. Crum adapted) Royston, Inc., is a large food-processing company. It processes 150,000 pounds of peanuts in the peanuts department at a cost of $180,000 to yield 12,000 pounds of product A, 65,000 pounds of product B, and 16,000 pounds of product C.
- Product A is processed further in the salting department at a cost of $27,000. It yields 12,000 pounds of salted peanuts, which are sold for $12 per pound.
- Product B (raw peanuts) is sold without further processing at $3 per pound.
- Product C is considered a byproduct and is processed further in the paste department at a cost of $12,000. It yields 16,000 pounds of peanut butter, which are sold for $6 per pound.
The company wants to make a gross margin of 10% of revenues on product C and needs to allow 20% of revenues for marketing costs on product C. An overview of operations follows:
- 1. Compute unit costs per pound for products A, B, and C, treating C as a byproduct. Use the NRV method for allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B.
Required
- 2. Compute unit costs per pound for products A, B, and C, treating all three as joint products and allocating joint costs by the NRV method.
Trending nowThis is a popular solution!
Learn your wayIncludes step-by-step video
Chapter 16 Solutions
NEW MyLab Accounting with Pearson eText -- Access Card -- for Financial Accounting
Additional Business Textbook Solutions
Financial Accounting
Intermediate Accounting (2nd Edition)
Construction Accounting And Financial Management (4th Edition)
Financial Accounting, Student Value Edition (4th Edition)
Principles of Accounting Volume 2
- Oakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of Beracyl in a joint production process, incurring 250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced. Mononate and Beracyl can each be sold at the split-off point in a semifinished state or, alternatively, processed further. Additional data about the two products are as follows: An assistant in the companys cost accounting department was overheard saying ...that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is simply not worth the effort. Which of the following strategies should be recommended for Oakes?arrow_forwardPacheco, Inc., produces two products, overs and unders, in a single process. The joint costs of this process were 50,000, and 14,000 units of overs and 36,000 units of unders were produced. Separable processing costs beyond the split-off point were as follows: overs, 18,000; unders, 23,040. Overs sell for 2.00 per unit; unders sell for 3.14 per unit. Required: 1. Allocate the 50,000 joint costs using the estimated net realizable value method. 2. Suppose that overs could be sold at the split-off point for 1.80 per unit. Should Pacheco sell overs at split-off or process them further? Show supporting computations.arrow_forwardEagle Brand Inc. produces two products as follows: Eagle Brand has 1,000 lbs. of raw materials that can be used to produce Products X and Y. Which of the following alternatives should Eagle Brand accept to maximize the contribution margin? a. 100 units of Product Y. b. 250 units of Product X. c. 200 units of Product X and 20 units of Product Y. d. 200 units of Product X and 50 units of Product Y.arrow_forward
- Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?arrow_forwardTucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000-gallon drums for 2.000. Processing costs are 3,000 to process the 1,000 gallons of Duointo 800 gallons of Big and 200 gallons of Mini. The selling price is 9 per gallon for Big and4 per gallon for Mini. If the physical units method is used to allocate joint costs to the finalproducts, the total cost allocated to produce Mini is: a. 500. b. 4,000. c. 1,000. d. 4,500.arrow_forwardTaylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio and Maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and Maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year, Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2,000 units of Maslimpio. The detail of each products unit contribution margin is as follows: Taylor Company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6,000 quarts it planned to use in the coming years production. There is no other source of the material. Required: 1. Compute the total contribution margin that the company would earn if it could import the 6,000 quarts of the material. 2. Determine the optimal usage of the companys inventory of 6,000 quarts of the material. Compute the total contribution margin for the product mix that you recommend. 3. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year. a. Formulate the linear programming problem faced by Taylor Company. To do so, you must derive mathematical expressions for the objective function and for the materials and labor constraints. b. Solve the linear programming problem using the graphical approach. c. Compute the total contribution margin produced by the optimal mix.arrow_forward
- Venezuela Oil Inc. transports crude oil to its refinery where it is processed into main products gasoline, kerosene, and diesel fuel, and by-product base oil. The base oil is sold at the split-off point for $1,000,000 of annual revenue, and the joint processing costs to get the crude oil to split-off are $10,000,000. Additional information includes: Required: Determine the allocation of joint costs using the net realizable value method, rounding the sales value percentages to the nearest tenth of a percent. (Hint: Reduce the amount of the joint costs to be allocated by the amount of the by-product revenue.)arrow_forwardOat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?arrow_forwardOwly Corporation’s agriculture division currently produces their own soil mix to grow the plants they sell in. Owly currently makes 200,000 cubic meters of soil mix a year. Each cubic meter of soil mix has direct labour costs of $1.50, direct material costs of $3.15, variable overhead costs of $0.75, and fixed overhead costs of $0.70 for a total cost of $6.10 per cubic meter. An outside supplier has offered to sell Owly soil mix for $5.75 per cubic meter. If Owly purchases the soil mix, 25% of the fixed manufacturing overhead will be eliminated, the remaining 75% will still exist.A. What is the net dollar advantage (disadvantage) of purchasing the soil mix rather than making it?B. What is the maximum amount Owly is willing to pay an outside supplier per cubic meter (to the cent) for the soil mix if the supplier commits to supplying all 200,000 cubic meters?C. After one month of greenhouse growing time Owly can produce 100,000 four inch pot basil plants that can be sold for $2.20 each.…arrow_forward
- Joint costs and byproducts. (W. Crum adapted) Royston, Inc., is a large food-processing company. It processes 150,000 pounds of peanuts in the peanuts department at a cost of $180,000 to yield 12,000 pounds of product A, 65,000 pounds of product B, and 16,000 pounds of product C.arrow_forwardBrevall Industries makes corn oil and corn meal from harvested corn in a joint process. The corn oil can be further processed into margarine, and the corn meal can be further processed into corn muffin mix. The joint cost incurred to process the corn to the split-off point is $140,000. Information on the quantities, value, and further processing costs for the joint products appear below: Sales Value Estimated Further Sales Value Quantity At Split-off Processing Cost After Processing Corn Oil 800,000 lbs. $0.30/lb. $0.15/lb. $0.60/lb. Corn Meal 1,600,000 lbs. 0.10/lb. 0.46/lb. 0.55/lb. Brevall allocates the joint cost to the products based on the relative sales value at split-off point. How much joint cost should be assigned to the corn meal?…arrow_forwardWebster Company produces 36,000 units of product A, 28,000 units of product B, and 11,000 units of product C from the same manufacturing process at a cost of $350,000. A and B are joint products, and C is regarded as a by-product. The unit selling prices of the products are $20 for A, $10 for B, and $1 for C. None of the products requires separable processing. Of the units produced, Webster Company sells 29,000 units of A, 27,000 units of B, and 11,000 units of C. The firm uses the net realizable value method to allocate joint costs and by-product costs. Assume no beginning inventory. Required: 1. What is the value of the ending inventory of product A? 2. What is the value of the ending inventory of product B?arrow_forward
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning