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W6Chapters16_17 - Lydia Holmes Week 6 16-18 Net realizable...

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Lydia Holmes Week 6 16-18 - Net realizable value method July 2007 - Production and Selling Price Cooking Oil Joint costs (costs of vegetable oil and processing to splitoff point) Separable cost of processing beyond splitoff point $30,000,000 Beginning inventory (drums) - Production (drums) 1,000,000 Sales (drums) 1,000,000 Ending inventory (drums) - Selling price per drum $50 - Allocate the $24,000,000 joint costs using the NRV method Cooking Oil Final sales of value of total producting during accounting period (1,000,000 x $50 ; 500,000 x $25) $50,000,000 Deduct seperable costs $30,000,000 Net Realizable Value at Splitoff Point $20,000,000 0.80 Joint costs allocated (0.80 x $24,000,000 ; 0.20 x $24,000,000) $19,200,000 Weighting ($20,000,000 ÷ $25,000,000 ; $5,000,000 ÷ $25,000,000)
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Soap Oil Joint Costs $24,000,000 $7,500,000 - 500,000 500,000 - $25 Soap Oil $12,500,000 $7,500,000 $5,000,000 $25,000,000 0.20 $4,800,000
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Lydia Holmes Week 6 16-25 - Joint costs and byproducts Department 1 Processes 600,000 lbs Cost is $800,000 Product L yields 50,000 lbs Product W yields 300,000 lbs Product X yields 100,000 lbs Product L is processed further in Deparment 2 at a cost of $100,000 and sold for $10 per pound Product W is sold without futher processing at $2 per pound Product X is considered a byproduct and is processed further in Department 3 at a cost of $50,000 and sold for $3 per pound Wants gross margin of 10% of revenues on Product X And needs to allow 25% of revenues for marketing costs on Product X.
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1. Compute unit costs per pound for products L, W, and X, treating X as a byproduct. Use Revenues (Product X) $300,000 Deduct Gross margin, 10% of revenues $30,000 Marketing costs, 25% of revenues $75,000 Department 3 seperable costs $50,000 Net realizable value $145,000 Net joint costs $655,000 Product L Product W Final sales of value of total producting during period (50,000 x $10 ; 300,000 x $2 ; 100,000 x $3) $500,000 $600,000 Deduct seperable costs $100,000 $- Net Realizable Value at Splitoff Point $400,000 $600,000 Weighting 0.40 0.60 Joint costs allocated $262,000 $393,000 Production costs $7.24 $1.31 2. Compute unit costs per pound for products L, W, and X, treating all three as joint produ Product L Product W Final sales of value of total producting during period (50,000 x $10 ; 300,000 x $2 ; 100,000 x $3) $500,000 $600,000 Deduct seperable costs $100,000 $- Net Realizable Value at Splitoff Point $400,000 $600,000 Weighting 0.34 0.51
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