978-0077733773 Chapter 7 Solution Manual Part 7

subject Type Homework Help
subject Pages 9
subject Words 940
subject Authors David Stout, Edward Blocher, Gary Cokins, Paul Juras

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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-43 (continued -1)
4. No, NBP should not process RBL further.
Increase in sales revenue: 80,000 x ($12 - $10) = $160,000
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-44 Joint Products (20 min)
1. Physical Unit Method
2. Sales Value at Split off Method
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-44 (continued -1)
Part 2 Continued
Notice how the unit gross profit figures change for parts 1 and 2. The
reason is the relatively large sales volumes for Premium and
Gourmet; sales value is used in part 2, with the effect of increasing
the joint cost allocated to these products and reducing the joint cost
3.
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-45 Joint Products (20 min)
(a) Physical Unit Method
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-45 (continued -1)
(b) Sales Value at Split Off Method
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-45 (continued -2)
(c) Net Realizable Value Method
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-45 (continued -3)
(d) The Constant Gross Margin Percentage Method
2. In this case the net realizable value method should be preferred
because all Johnston’s production is processed further, and the NRV
method accounts for the additional processing costs. Note particularly, that
under the Sales Value at Split Off method, the gross margin for product
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-46 Joint Products; By-Products (Appendix) (50 min)
1. The relative sales value method of joint cost allocation assigns
cost in proportion to each product's sales value to the sales value of
all products. If there is no sales value at split-off, then the value at
the first sales point less separable costs is used. If joint products
have a sales value at the split-off point, the margin for all joint
products at the split-off point will be the same.
As long as the total net realizable value of all joint products
exceeds the total production costs, all the products will be profitable
and the carrying value of the inventory will be less than the net
realizable value. Furthermore, the joint costs are allocated in
production costs.”
2. Because both main products have a market value at the split-off
point, this value is used to allocate the joint cost rather than the final
sales value.
Joint production costs to be allocated $2,640,000
Less net realizable value of
by-product 240,000 x ($.55 - $.05) = 120,000
Joint costs to be allocated $2,520,000
Percentage
Market value at Split-off of Total
Allocation of Joint Costs
Pepco-1 ($2,520,000 x .625) $1,575,000
Repke-3 ($2,520,000 x .375) 945,000
SE-5 120,000
November joint production costs $2,640,000
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-46 (continued -1)
3. When SE-5 becomes a main product, the joint production costs
would be proportionally allocated to all three products on the basis of
the sales value of each product at the split-off point. The net
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Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-47 Joint Products (40 min)
1. Because by-products are assigned an inventory cost equal to their
net realizable value (NRV) at the time they are produced, the NRV of
J-23 must be deducted from the joint production costs prior to
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