Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 10, Problem 11PB
Strawberry Sweet Company makes a variety of jams and jellies. During June, 55,000 gallons of strawberry mash was processed at a joint cost of $40,000. This produced 42,000 gallons of preserve-grade mix and 4,000 gallons of Strawberry juice for jelly. The juice could be processed further into energy drinks, and the preserve mix could be processed further into ice cream flavoring. Information on these items is shown:
A. Assume that the joint cost is allocated to the products based on the physical quantity of output of each product. How much joint cost should be assigned to each product?
B. How much joint cost should be assigned to each product if the relative sales value allocation method is used?
C. Which products should be processed further?
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Data table
Milk
Ghee, byproduct
Production
(in gallons)
580,000
13,000
Sales (in
gallons)
Selling Price
per Gallon
556,800 $
12,350 $
1.00
0.60
Holy Cow is a producer of milk and byproducts. A single production process at Holy Cow yields milk as the main product, as well as ghee, a byproduct of milk production, that can be sold. Both products are fully
processed by the splitoff point, and there are no separable costs. For the month of October 2020, the cost of operations is $380,000. Production and sales data are as follows:
(Click the icon to view the production and sales data.)
There were no beginning inventories on October 1, 2020.
Read the requirements.
Requirements
1. What is the gross margin for Holy Cow under the production method and the
sales method of byproduct accounting?
2. What are the inventory costs reported in the balance sheet on October 31,
2020, for the main product and byproduct under the two methods of byproduct
accounting in requirement 1?
Print
- X
Done
Data table
Milk
Ghee, byproduct
Production
(in gallons)
540,000
12,000
Print
Sales (in
gallons)
Selling Price
per Gallon
523,800 $
11,400 $
Done
0.80…
A dairy operation processes raw milk into two main products: skim milk and cream. Both of these products are salable at the end of the
joint process, worth $13,000 and $23,000, respectively. The skim milk can be further processed at a cost of $8,190 in order to yield
sweetened condensed milk. This final product can be sold for $24,000. The cream can also be processed further, at a cost of $9,810, in
order to generate butter, which is worth $45,000. If the joint process costs are $21,000, how much of the joint cost will be allocated to
each product under the NRV method? (Round proportion to 2 decimal places, e.g. 0.25 and final answers to O decimal places, e.g. 5,125.)
Allocated joint costs $
Skim Milk
+A
$
Cream
Chapter 10 Solutions
Principles of Accounting Volume 2
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