MANAGERIAL ACCOUNTING F/MGRS.
MANAGERIAL ACCOUNTING F/MGRS.
5th Edition
ISBN: 9781259969485
Author: Noreen
Publisher: RENT MCG
Question
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Chapter 6, Problem 1AE

1.

To determine

Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.

To check: Worksheet and complete the calculation

1.

Expert Solution
Check Mark

Answer to Problem 1AE

Complete worksheet is given below

Explanation of Solution

    Data Amount $`Amount $
    Cost of wool200,000
    Cost of separation process 40,000
    Sales value of intermediate product at split off point
    Un-dyed coarse wool120,000
    Un-dyed fine wool150,000
    Un-dyed superfine wool60,000
    Cost of further processing
    Un-dyed coarse wool50,000
    Un-dyed fine wool60,000
    Un-dyed superfine wool10,000
    Sales value of end products
    Un-dyed coarse wool160,000
    Un-dyed fine wool240,000
    Un-dyed superfine wool90,000
    Calculation of requirement using formula
    Analysis of the profitability of the overall operation
    Combine final sale value 490,000
    Less: costs of production the ending products.
    Un-dyed coarse wool200,000
    Un-dyed fine wool40,000
    Un-dyed superfine wool120,000360,000
    130,000
    Analysis of sell or process furtherCoarse FineSuper fine
    Final sales value after further processing 160,000240,00090,000
    Less: sales value at the split off point120,000150,00060,000
    Incremental revenue from further processing 40,00090,00030,000
    Less: cost of further processing 50,00060,00010,000
    Profit or loss of further processing (10,000)30,00020,000

Profit or loss:

    Data Amount $`Amount $
    Cost of wool200,000
    Cost of separation process 40,000
    Sales value of intermediate product at split off point
    Un-dyed coarse wool120,000
    Un-dyed fine wool150,000
    Un-dyed superfine wool60,000
    Cost of further processing
    Un-dyed coarse wool50,000
    Un-dyed fine wool60,000
    Un-dyed superfine wool10,000
    Sales value of end products
    Un-dyed coarse wool160,000
    Un-dyed fine wool240,000
    Un-dyed superfine wool90,000
    Calculation of requirement using formula
    Analysis of the profitability of the overall operation
    Combine final sale value 490,000
    Less: costs of production the ending products.
    Un-dyed coarse wool200,000
    Un-dyed fine wool40,000
    Un-dyed superfine wool120,000340,000
    150,000
    Analysis of sell or process furtherCoarse FineSuper fine
    Final sales value after further processing 160,000240,00090,000
    Less: sales value at the split off point120,000150,00060,000
    Incremental revenue from further processing 40,00090,00030,000
    Less: cost of further processing 30,00060,00010,000
    Profit or loss of further processing 10,00030,00020,000

2.

To determine

Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.

To prepare: Traditional format income statement and Contribution format income statement

2.

Expert Solution
Check Mark

Answer to Problem 1AE

Income statement and Contribution format income statement is given below:

Explanation of Solution

    Data Amount $`Amount $
    Cost of wool290,000
    Cost of separation process 40,000
    Sales value of intermediate product at split off point
    Un-dyed coarse wool100,000
    Un-dyed fine wool110,000
    Un-dyed superfine wool90,000
    Cost of further processing
    Un-dyed coarse wool50,000
    Un-dyed fine wool60,000
    Un-dyed superfine wool10,000
    Sales value of end products
    Un-dyed coarse wool180,000
    Un-dyed fine wool210,000
    Un-dyed superfine wool90,000
    Calculation of requirement using formula
    Analysis of the profitability of the overall operation
    Combine final sale value 480,000
    Less: costs of production the ending products.
    Un-dyed coarse wool290,000
    Un-dyed fine wool40,000
    Un-dyed superfine wool120,000450,000
    30,000
    Analysis of sell or process furtherCoarse FineSuper fine
    Final sales value after further processing 180,000210,00090,000
    Less: sales value at the split off point100,000110,00090,000
    Incremental revenue from further processing 80,000100,0000
    Less: cost of further processing 50,00060,00010,000
    Profit or loss of further processing 30,00040,000(10,000)
  1. Thus the overall profit of operation is $30,000 if final products are from intermediate products
  2. Thus, further processing profit of coarse wool is $30,000. Fine wools $40,000 and super fine wool is $10,000
  3. Overall operation profit:
    Particular Amount Amount
    Combined sales value (180,000+210,000+90,000)480000
    Less: costs of product the end products 290000440,000
    Cost of wool40000
    Cost of separation process 110000
    Combined cost dyeing (50,000+60,000)
    Profit 40,000

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