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accessible website, in whole or in part.
d.
Joint cost allocated to jackets
$ 138,000
Additional costs
20,000
Total cost for 16,000 jackets
$ 158,000
Sales (12,000 $16.75*)
$ 201,000
Cost for 12,000 jackets (0.75 $158,000)
(118,500)
Gross profit
$ 82,500
*$268,000 ÷ 16,000 = $16.75 per jacket
25. a. If the by-product is accounted for at the time of production, by-product inventory is
Cost of sales for gasoline: Beginning inventory of gasoline
$ 0
Production costs to split-off point
Less NRV of by-product
Sales of by-product
$ 60,000
Production & Marketing
(50,000)
(10,000)
Current manufacturing costs of gasoline
Ending inventory of gasoline
(30,000)
Cost of sales for gasoline
(CPA adapted)
26. a. 2
b. 2
c. 2
d. 1
27.
Joint process cost
$337,500
Less net realizable value of by-product inventory
(65,000)
Amount to be allocated
$272,500
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Proration of amount to be allocated based on weight:
Product
Bushels
Proportion
Allocation
Premium
16,500
0.25
$ 68,125
Good
43,560
0.66
179,850
Fair
5,940
0.09
24,525
66,000
1.00
$272,500
28. a.
Joint cost
$142,000
Less NRV of by-product [2,000 × ($1.50 – $0.30)]
(2,400)
Joint cost to be allocated
$139,600
Approx. NRV of Fillet [18,000 × ($16 – $3)]
$234,000
60%
Approx. NRV of Smoked [20,000 × ($13.00 – $5.20)]
156,000
40%
Total NRV
$390,000
Cost allocation:
Fillet (0.6 $139,600)
$ 83,760
Smoked (0.4 $139,600)
55,840
Total cost allocation
$139,600
b. Separate costs for Fillet = 18,000 $3.00 = $ 54,000
Separate costs for Smoked = 20,000 $5.20 = $104,000
Fillet
Smoked
Joint cost
$ 83,760
$ 55,840
Separate costs
54,000
104,000
Total costs
$137,760
$159,840
Divide by pounds
÷ 18,000
÷ 20,000
Cost per pound (rounded)
$ 7.65
$ 7.99
Inventory values:
Fillet (4,000 $7.65)
$30,600
Smoked (2,400 $7.99)
19,176
Remnants (350 $1.20)
420
Total inventory value
$50,196
29. Because the by-product has substantial value, the by-product should be accounted for us-
ing NRV rather than realized value, which would result in distorted cost information.
Whether the direct or indirect method is used would be dependent on the timing of the
30. a.
Total joint cost
$20,000,000
Revenue from tours
$ 800,000
Expenses of tours
(480,000)
(320,000)
Joint cost to be allocated
$19,680,000
Chapter 11 327
Greedy CEOs
Gross revenues
$10,000,000
$ 58,000,000
Separate costs
(6,800,000)
(41,200,000)
Net realizable value
$ 3,200,000
$ 16,800,000
Joint cost allocation:
NRV
Greedy CEOs
$ 3,200,000
16%
Sequel
16,800,000
84%
$20,000,000
100%
b.
Greedy CEOs
Sequel
Gross revenues
$10,000,000
Separate costs
(6,800,000)
(41,200,000)
Net realizable value
$ 3,200,000
Joint cost
(3,148,800)
(16,531,200)
Net profit
$ 51,200
31. Total sales value (1,200 × $335)
$ 402,000
Less costs (1,200 × $250)
(300,000)
Reduction of joint cost
$ 102,000
remain the same.
32. a.
Sales of lumber (160,000 × $10)
$1,600,000
Cost of sales:
Production costs
$664,000
By-product revenue
(40,000 pounds ÷ 100 = 400 bags; 400 $4)
(1,600)
(662,400)
Gross margin
$ 937,600
in the same gross margin of $937,600.
33.
Sales of by-product
$20,250
Cost of by-product sales (135,000 $0.06)
(8,100)
Net realizable value of by product
$12,150
a. Zeena Foods
Income Statement
For Month Ended May 31, 2013
Sales revenue (joint products)
Cost of goods sold:
$ 319,000
Joint cost (90% × $82,000)
$73,800
Separate costs (90% × $48,000)
43,200
By-products
8,100
(125,100)
Gross profit
$ 193,900
Non-factory expenses
(47,850)
Income from operations
$ 146,050
Other revenues (by-product sales)
20,250
Net income before taxes
$ 166,300
328 Chapter 11
b. Zeena Foods
Income Statement
For Month Ended May 31, 2013
Sales revenue (joint products)
$ 319,000
Cost of goods sold ($73,800 + $43,200)
(117,000)
Gross profit
$ 202,000
Non-factory expenses
(47,850)
Income from operations
$ 154,150
Other income (by-product sales)
12,150
Net income before taxes
$ 166,300
c.
Joint cost
$ 82,000
NRV of by-product
(12,150)
Joint cost to allocate
$ 69,850
Zeena Foods
Income Statement
For Month Ended May 31, 2013
Sales revenue
$ 319,000
Cost of goods sold [(90% × $69,850) + $43,200]
(106,065)
Gross profit
$ 212,935
Non-factory expenses
(47,850)
Net income before taxes
$ 165,085
the by-product.
34. a.
Estimated OH
$415,200
Estimated NRV of by-product
(9,200)
Estimated OH to be covered
$406,000
Divided by estimated billable hours
÷ 70,000
Predetermined OH rate per billable hour
$ 5.80
b. Cash 9,700
Manufacturing Overhead 9,700
To record sale of by-product
c.
Total actual OH
$ 410,500
Total actual NRV of by-product
(9,700)
Total adjusted actual OH
$ 400,800
Total applied OH (70,900 × $5.80)
(411,220)
Overapplied overhead
$ 10,420
35. a. $315,000 ÷ 45,000 = $7 per DLH
b.
DM
$ 890
DL ($20 × 125)
2,500
OH ($7 × 125)
875
Total
$4,265
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c. Cash 93
Manufacturing Overhead 93
To record disposal value of spoiled work
incurred on Job XX (stained glass window)
d. OH rate = ($297,200 + $25,200) ÷ 45,000 = $7.16 (rounded)
DM
$ 890
DL ($20 × 125)
2,500
OH ($7.16 × 125)
895
Total
$4,285
Scrap sales value
(93)
Total cost of job
$4,192
To record sale of Hedge Fund model
To record sale of Hedge Fund model
37. a.
Joint Services
Increase in Revenues
Allocated Cost
Rental
$770,000
0.88
$28,600
Sales
105,000
0.12
3,900
Totals
$875,000
1.00
$32,500
b.
Joint Services
Increase in Net Income
Allocated Cost
Rental
$104,500
0.55
$17,875
Sales
85,500
0.45
14,625
Totals
$190,000
1.00
$32,500
38. a. Training cost = $120,000 ÷ 6,000 = $20 per hour
Overhead cost = $55,500 ÷ 6,000 = $9.25 per hour
Cost Assignment:
Children
Adults
Direct costs (4,000 $20; 2,000 $20)
$ 80,000
$40,000
Overhead cost (4,000 $9.25; 2,000 $9.25)
37,000
18,500
Total cost assigned
$117,000
$58,500
b.
Application rate = $55,500 ÷ [($35 4,000) + ($65 2,000)]
= $55,500 ÷ ($140,000 + $130,000)
= $55,500 ÷ $270,000
= $0.21 per dollar of sales value (rounded)
330 Chapter 11
Cost Assignment:
Children
Adults
Direct costs (4,000 × $20; 2,000 $20)
$ 80,000
$40,000
Overhead cost ($140,000 0.21; $130,000 0.21)
29,400
27,300
Total cost assigned (off due to rounding)
$109,400
$67,300
greater rates for insurance, and more equipment damage for children than for adults.
39. a.
Joint Activity
Percent
Joint Cost Allocated
Fund-raising
0.10
$ 26,100
Program
0.90
234,900
Total
1.00
$261,000
b.
Joint Activity
Percent
Joint Cost Allocated
Fund-raising
0.02
$ 5,220
Program
0.98
255,780
Total
1.00
$261,000
40. Each student will have a different answer. No solution is provided.
Chapter 11 331
accessible website, in whole or in part.
PROBLEMS
41. Each student will have a different answer. No solution is provided. One good source of in-
formation is “Corn Farmers Smile as Ethanol Prices Rise, but Experts on Food Supplies Wor-
ry” at http://www.public.iastate.edu/~yikes/iowa_corn.html.
42. a.
Joint cost allocation:
Forever ($238,365 ÷ $317,820) × $76,950
$57,712.50
Fantasy ($79,455 ÷ $317,820) × $76,950
19,237.50
Total
$76,950.00
Total cost:
b. Work in Process Inventory—Combining
59,715.00
Raw Material Inventory
42,000.00
Wages Payable
11,340.00
Manufacturing Overhead
6,375.00
Work in Process Inventory—Heating
59,715.00
Work in Process Inventory—Combining
59,715.00
Work in Process Inventory—Heating
17,235.00
Raw Material Inventory
9,150.00
Wages Payable
3,225.00
Manufacturing Overhead
4,860.00
Work in Process Inventory—Heating
3,180.00
Raw Material Inventory
3,180.00
Work in Process Inventory—Heating
13,815.00
Raw Material Inventory
2,940.00
Wages Payable
4,680.00
Manufacturing Overhead
6,195.00
Finished Goods Inventory—Forever
60,892.50
Finished Goods Inventory—Fantasy
33,052.50
Work in Process Inventory—Heating
93,945.00
332 Chapter 11
c.
Work in Process—Combining
DM
42,000
To Heating
59,715
DL
11,340
OH
6,375
Bal.
0
Work in Process—Heating
DM
9,150
To FG—Forever
60,892.50
DL
3,225
To FG—Fantasy
33,052.50
OH
4,860
Prev. Dept.
59,715
DM
3,180
DM
2,940
DL
4,680
OH
6,195
Bal.
0
FG Inv.—Forever
FG Inv.—Fantasy
Beg. XXX
Beg. XXX
CGM 60,892.50
CGM 33,052.50
43. a.
Oil (5,000,000 bushels × 11 lbs.)
55,000,000
20%
Meal (5,000,000 bushels × 44 lbs.)
220,000,000
80%
Total
275,000,000
Joint cost allocation:
Oil (0.20 × $49,800,000)
$ 9,960,000
Meal (0.80 × $49,800,000)
39,840,000
Total
$49,800,000
b.
Cost of goods sold (in millions):
Oil (0.60 $9,960,0000)
$ 5,976,000
Meal (0.75 $39,840,000)
29,880,000
Total
$35,856,000
c.
Ending finished goods (in millions):
Oil (0.40 × $9,960,000)
$ 3,984,000
Meal (0.25 × $39,840,000)
9,960,000
Total
$13,944,000
44. a.
Joint cost allocation:
Skim (1,555,500 ÷ 1,830,000) × $872,000
$741,200
Cream (274,500 ÷ 1,830,000) × $872,000
130,800
Total
$872,000
Chapter 11 333
b. Skim [($741,200 + $67,660) ÷ 1,555,500] = $808,860 ÷ 1,555,500 = $0.52; $0.52 ×
Total finished goods inventory = $2,860 + $390 = $3,250
Beginning finished goods inventory
$ 0
Cost of goods manufactured
1,022,970
Goods available for sale
$ 1,022,970
Ending finished goods inventory
(3,250)
Cost of goods sold
$ 1,019,720
Sales ($1,472,500 + $282,220)
$ 1,754,720
Cost of goods sold
(1,019,720)
Gross margin
$ 735,000
45. a. Relative sales value:
Oil ($0.50 × 55,000,000)
$27,500,000
38% (rounded)
Meal ($0.20 × 220,000,000)
44,000,000
62% (rounded)
Total
$71,500,000
100%
Oil (0.38 × $49,800,000)
$18,924,000
Meal (0.62 × $49,800,000)
30,876,000
Total
$49,800,000
b. Cost of goods sold:
Oil (0.60 × $18,924,000)
$11,354,400
Meal (0.75 × $30,876,000)
23,157,000
Total
$34,511,400
c. Ending finished goods:
Oil (0.40 × $18,924,000)
$ 7,569,600
Meal (0.25 × $30,876,000)
7,719,000
Total
$15,288,600
46. a. Skim: $1,472,500 ÷ 1,550,000 gallons = $0.95 per gallon
334 Chapter 11
Cost of goods sold
Gross margin
b.
Total
Credit Cards: $774,000 × ($1,386,000 ÷ $3,300,000)
Total
Peaches
Labor
Overhead (40% of labor)
Joint cost
b.
Relative sales values:
Skim ($0.95 1,555,500)
$1,477,725
84% (rounded)
Cream ($1.03 274,500)
282,735
16% (rounded)
Total
$1,760,460
100%
Joint cost allocation:
Skim (0.84 $872,000)
$732,480
Cream (0.16 $872,000)
139,520
Total
$872,000
c. Skim [($732,480 + $67,660) ÷ 1,555,500] = $800,140 ÷ 1,555,500 = $0.51 (rounded);
Cream [($139,520 + $83,310) ÷ 274,500] = $222,830 ÷ 274,500 = $0.81 (rounded);
Total finished goods inventory = $2,805 + $405 = $3,210
Beginning finished goods inventory
$ 0
Cost of goods manufactured
1,022,970
Goods available for sale
$ 1,022,970
Ending finished goods inventory
(3,210)
Cost of goods sold
$ 1,019,760