Title | Ch15 solutions text problems d d dkdnd |
---|---|
Course | Managerial Accounting II |
Institution | McMaster University |
Pages | 6 |
File Size | 167.1 KB |
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CHAPTER15 COSTALLOCATI ON: J OI NTPRODUCTSAND BYPRODUCTS 1 531
( 25mi n. )
Ac c ount i ngf orabypr oduc t .
1. Bypr oduc tr e c ogni z e da tt i meofpr oduc t i on: Joint cost = $1,500 Joint cost to be charged to main product = Joint Cost – NRV of Byproduct = $1,500 (50 kg × $1.20) = $1,440 Inventoriable cost of main product = $1,440 / 500 = $2.88 per container Inventoriable cost of byproduct = NRV = $1.20 per kilogram Gross Margin Calculation under Production Method Revenues Main product: Water (600/2 containers × $8) Byproduct: Sea Salt Cost of goods sold Main product: Water (300 containers × $2.88) Gross margin Gross-margin percentage ($1,536 ÷ $2,400)
$2,400 0 2,400 864 $1,536 64.00%
Inventoriable costs (end of period): Main product: Water (200 containers × $2.88) = $576 Byproduct: Sea Salt (10 kilograms × $1.20) = $12 2.
Byproduct recognized at time of sale: Joint cost to be charged to main product = Total joint cost = $1,500 Inventoriable cost of main product = $1500 / 500 = $3.00 per container Inventoriable cost of byproduct = $0 Gross Margin Calculation under Sales Method Revenues Main product: Water (600/2 containers × $8) Byproduct: Sea Salt (40 kilograms × $1.20) Cost of goods sold Main product: Water (300 containers × $3.00) Gross margin Gross-margin percentage ($1,548 ÷ $2,448)
$2,400 48 2,448 900 $1,548 63.2%
Inventoriable costs (end of period): Main product: Water (200 containers × $3.00) = $600 Byproduct: Sea Salt (10 kilograms × $0) = $0
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1 5 –1
I ns t r uc t or ’ sSol ut i onsManua lf orCo s tAc c o unt i ng, 8 Ce
1 53 1 3.
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( c ont i nue d)
The production method recognizes the byproduct cost as inventory in the period it is produced. This method sets the cost of the byproduct inventory equal to its net realizable value. When the byproduct is sold, inventory is reduced without being expensed through the income statement. The sales method associates all of the production cost with the main product. Under this method, the byproduct has no inventoriable cost and is recognized only when it is sold.
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Cha pt e r15
15-34
(20 min.)
Joint-cost allocation with a byproduct.
1. Sales value at splitoff method: Byproduct recognized at time of production method
Table Covers 30,000a 25,000 5,000
Products manufactured Products sold Ending inventory
Chair Covers 90,000b 80,000 10,000
Package Filler (lbs) 6,000c 5,000 1,000
a
0.25 table covers per 1 lb of bottles × 120,000 lbs of bottles = 30,000 table covers 0.75 chair covers per 1 lb of bottles × 120,000 lbs of bottles = 90,000 chair covers c 0.05 lbs of package filler per 1 lb of bottles × 120,000 lbs of bottles = 6,000 lbs of package filler b
Joint cost to be charged to joint products = Joint Cost – NRV of Byproduct = $600,000 – (6,000 lbs x 1 per lb) = $600,000 – $6,000 = $594,000
Sales value of covers at splitoff, 30,000 × $12; 90,000 × $8 Weighting, $360,000; $720,000 $1,080,000 Joint costs allocated, 1/3; 2/3 × $594,000
Revenues, 25,000 × $12; 80,000 × $8 Cost of goods sold: Joint costs allocated, 1/3; 2/3 × $594,000 Less: Ending inventory Cost of goods sold Gross margin d e
Table Covers $ 360,000 1/3 $198,000
Chair Covers
Total
$720,000 2/3 $396,000
$1,080,000 $ 594,000
Table Covers $ 300,000
Chair Covers $640,000
Total $940,000
$198,000 (33,000)d $165,000 $135,000
$396,000 (44,000)e $352,000 $288,000
$594,000 (77,000) $517,000 $423,000
5,000 × ($198,000/30,000) = $33,000 10,000 × ($396,000/90,000) = $44,000
The ending inventory of package filler is reported at its estimated market value of $1,000 (1,000 lbs × $1).
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I ns t r uc t or ’ sSol ut i onsManua lf orCo s tAc c o unt i ng, 8 Ce
15-34
(continued)
2. Sales value at splitoff method: Byproduct recognized at time of sale method Joint cost to be charged to joint products = Joint Cost = $600,000
Table Covers Sales value of covers at splitoff, 30,000 × $12; 90,000 × $8 Weighting, $360,000; $720,000 $1,080,000 Joint costs allocated, 1/3; 2/3 × $600,000
Table Covers Revenues, 25,000 × $12; 80,000 × $8; 5,000 × $1 Cost of goods sold: Joint costs allocated, 1/3; 2/3 × $600,000 Less: Ending inventory Cost of goods sold Gross margin f g
$300,000
$360,000 1/3 $200,000
Chair Covers
Total
$720,000 2/3 $400,000
$1,080,000 $ 600,000
Chair Covers
Package Filler (lbs)
Total
$640,000
$5,000
$945,000
$200,000
$400,000
$600,000
(33,333)f $166,667 $133,333
(44,444)g $355,556 $284,444
(77,777) $522,223 $422,777
$5,000
5,000 × ($200,000/30,000) = $33,333 10,000 × ($400,000/90,000) = $44,444
3. The production method of accounting for the byproduct is only appropriate if SRC is positive they can sell the byproduct at the expected selling price. Moreover, SRC should view the byproduct’s contribution to the firm as material enough to find it worthwhile to record and track any inventory that may arise. The sales method is appropriate if either the disposition of the byproduct is unsure or the selling price is unknown, or if the amounts involved are so negligible as to make it economically infeasible for SRC to keep track of byproduct inventories. The gross margin for package fillers is less than 2% of the total company gross margin. SRC should probably use the sales method based on the negligible monetary value associated with the byproduct.
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Cha pt e r15
15-36 1.
(30 min.)
Joint-cost allocation, process further or sell. Separable Costs
Joint costs
Amber Further Processing
Processing
AT/Cobalt
$2,200,000
Bronze
Splitoff Point Final sales value of total production Deduct separable costs Net realizable value at splitoff point
Amber $892,500 — $892,500
Bronze $990,000 _____ — $990,000
AT/Cobalt Total $6,000,000 $7,882,500 2,200,000 2,200,000 $ 3,800,000 $5,682,500
Weightingb Joint costs allocatedc
0.157 $847,800
0.174 $939,600
0.669 $3,612,600
a
1.000 $5,400,000
a
$3.50 × 255,000; $2 × 495,000; $8 × 750,000 $892,500; $990,000; $3,800,000 ÷ $5,682,500 c $5,400,000 × 0.157; 0.174; 0.669 b
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15-36
(continued)
2. Further processing Amber Incremental revenue ($5.50 × 227,500) – ($3.50 × 255,000) Incremental processing cost Incremental operating income/(loss)
$ 358,750 750,000 $ (391,250)
Further processing Bronze Incremental revenue ($4.00 × (495,000 × 1.15)) – ($2 × 495,000) Incremental processing cost Incremental operating income
$1,287,000 1,000,000 $ 287,000
Further processing Cobalt Incremental revenue ($8.00 × 750,000) – ($2.40 × 750,000) Less Incremental processing cost Incremental operating income/(loss)
$4,200,000 2,200,000 $2,000,000
Current Policy NRV (from requirement 1): Sell Amber at splitoff Sell Bronze at splitoff Process Cobalt further Joint costs Operating income
Preferred Options Sell Amber at splitoff Process Bronze further ($990,000 + $287,000 incremental optg. inc.) Continue to Process Cobalt further Joint costs Operating income
$ 892,500 990,000 3,800,000 5,682,500 5,400,000 $ 282,500
$ 892,500 1,277,000 3,800,000 5,969,500 5,400,000 $ 569,500
Arnold is $287,000 better off by changing its policy regarding Bronze – it should process it further beyond the splitoff point.
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