Chapter 24, Problem 20E

(1)

To determine

Calculate the allocated cost of the sold items.

Explanation of Solution

Compute the allocated cost of the sold items:

Parts	Market value	% of total	Allocated cost	Cost per lobs
Lobster tails	$26,208 (8)	78% (6)	$9,828 (10)	$7.88 (12)
Lobster flakes	$7,392 (9)	22% (7)	$2,772 (11)	$5.25 (13)
Total	$33,600	100%	$12,600

Table (1)

Working note:

Calculate the total cost of goods sold:

Parts	Quantity (given) (a)	Cost (b)	Total $\text{(a)×(b)}$
Lobster tails	1,096 lobs	$7.88	$8,631
Lobster flakes	324 lobs	$5.25	$1,701
Total cost of goods sold			$10,332

Table (2)

…… (1)

Calculate the total cost of processed lobsters:

Parts	Amount
Lobster cost $\left(\text{2,400 lbs}\text{. x \$4}\text{.50}\right)$	$10,800
Labor cost	$1,800
Total cost of processed lobsters	$12,600

Table (3)

…… (2)

Calculate the total market value:

Parts	Quantity in pounds (a)	Price (b)	Total $\text{(a)×(b)}$
Lobster tails	1,248 (4)	$21	$26,208
Lobster flakes	528 (5)	$14	$7,392
Total market value			$33,600

Table (4)

…… (3)

Calculate the quantity of lobster tails:

$\begin{array}{c}\text{Quantity}\text{of}\text{lobster}\text{tails}\text{=}\left(\begin{array}{l}\text{Number}\text{of}\text{lobster}\text{purchased}\text{×}\\ \text{Percentage}\text{of}\text{tails}\text{processed}\end{array}\right)\\ \text{=}\text{2,400}\text{lbs}\text{.}\text{×}\text{52\%}\\ \text{=}\text{1248}\text{lbs}\text{.}\end{array}$ (4)

Calculate the quantity of lobster flakes:

$\begin{array}{c}\text{Quantity}\text{of}\text{lobster}\text{flakes}\text{=}\left(\begin{array}{l}\text{Number}\text{of}\text{lobster}\text{purchased}\text{×}\\ \text{Percentage}\text{of}\text{tails}\text{processed}\end{array}\right)\\ \text{=}\text{2,400}\text{lbs}\text{.}\text{×}\text{22\%}\\ \text{=}\text{528}\text{lbs}\text{.}\end{array}$ (5)

Calculate the percentage of allocation for lobster tails:

$\text{Percentage}\text{of}\text{allocation}\text{for}\text{lobster}\text{tails}\text{=}\frac{\text{Total}\text{market}\text{value}}{\begin{array}{l}\text{Market}\text{value}\text{of}\text{lobster}\text{tails}\\ \text{=}\frac{\text{\$26,208}}{\text{\$33,600}}\text{×100}\\ \text{=}\text{78\%}\end{array}}\text{×100}$ (6)

Calculate the percentage of allocation for lobster flakes:

$\text{Percentage}\text{of}\text{allocation}\text{for}\text{lobster}\text{flakes}\text{=}\frac{\text{Total}\text{market}\text{value}}{\begin{array}{l}\text{Market}\text{value}\text{of}\text{lobster}\text{flakes}\\ \text{=}\frac{\text{\$7,392}}{\text{\$33,600}}\text{×100}\\ \text{=}\text{22\%}\end{array}}\text{×100}$ (7)

Calculate the market value of lobster tails:

$\begin{array}{c}\begin{array}{l}\text{Calculate}\text{the}\text{market}\\ \text{value}\text{of}\text{lobster}\text{tails}\end{array}\}\text{=}\left(\begin{array}{l}\text{Total}\text{market}\text{value}\text{×}\text{percentage}\text{of}\\ \text{allocation}\text{to}\text{lobster}\text{tails}\end{array}\right)\\ \text{=}\text{\$33,600×78\%}\\ \text{=}\text{\$26,208}\end{array}$ (8)

Calculate the market value of lobster flakes:

$\begin{array}{c}\begin{array}{l}\text{Calculate}\text{the}\text{market}\\ \text{value}\text{of}\text{lobster}\text{flakes}\end{array}\}\text{=}\left(\begin{array}{l}\text{Total}\text{market}\text{value}\text{×}\text{percentage}\text{of}\\ \text{allocation}\text{to}\text{lobster}\text{flakes}\end{array}\right)\\ \text{=\$33,600×22\%}\\ \text{=}\text{\$7,392}\end{array}$ (9)

Calculate the allocated cost to lobster tails:

$\begin{array}{c}\begin{array}{l}\text{Allocated cost to }\\ \text{lobster tails}\end{array}\}\text{=}\left(\begin{array}{l}\text{Total}\text{cost}\text{allocated}\text{×}\\ \text{Percentage}\text{of}\text{allocation}\end{array}\right)\\ \text{=}\text{\$12,600}\text{×}\text{78\%}\\ \text{=}\text{\$9,828}\end{array}$ (10)

Calculate the allocated cost to lobster flakes:

$\begin{array}{c}\begin{array}{l}\text{Allocated cost to }\\ \text{losbter flakes}\end{array}\}\text{=}\left(\begin{array}{l}\text{Total}\text{allocated}\text{cost}\text{×}\\ \text{Percentage}\text{of}\text{allocation}\end{array}\right)\\ \text{=}\text{\$12,600×22\%}\\ \text{=}\text{\$2,772}\end{array}$ (11)

Calculate the cost per lb. of lobster tails:

$\begin{array}{c}\text{Cost}\text{per}\text{lb}\text{=}\frac{\text{Allocated}\text{cost}\text{of}\text{lobster}\text{tails}}{\text{Quatity}\text{of}\text{lobster}\text{tails}}\\ \text{=}\frac{\text{\$9,828}}{\text{1,248lbs}}\\ \text{=}\text{\$7}\text{.88}\end{array}$ (12)

Calculate the cost per lb. of lobster flakes:

$\begin{array}{c}\text{Cost}\text{per}\text{lb}\text{=}\frac{\text{Allocated}\text{cost}\text{of}\text{lobster}\text{flakes}}{\text{Quatity}\text{of}\text{lobster}\text{flakes}}\\ \text{=}\frac{\text{\$2,772}}{\text{528lbs}}\\ \text{=}\text{\$5}\text{.25}\end{array}$ (13)

(2)

To determine

Calculate the allocated cost of the ending inventory.

Explanation of Solution

Parts	Quantity (a)	Cost (b)	Total $\text{(a)×(b)}$
Lobster tails	152 lbs. $\text{(1,248}\text{lbs}-\text{1,096}\text{lbs)}$	$7.88	$1,197
Lobster flakes	153 lbs. $\text{(528}\text{lbs}-324\text{lbs)}$	$5.25	$1,071
Total inventory cost			$2,268

Table (1)

Note: Cost of goods sold ($10,332) plus cost of ending inventory ($2,268) equals the total cost of $12,600.