Week 12 - Accy211: Management Accounting II Autumn Session...

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Accy211: Management Accounting II Autumn Session 2009 Tutorial solutions: Week 12 CHAPTER 16 Questions Q16-16 Q16-17 Q16-18 Q16-19 Q16-27 16-16: Joint-cost allocation, insurance settlement. 1. (a) Sales value at splitoff method: Pounds of Product Wholesale Selling Price per Pound Sales Value at Splitoff Weighting: Sales Value at Splitoff Joint Costs Allocated Allocated Costs per Pound Breasts Wings Thighs Bones Feathers 100 20 40 80 10 250 $0.55 0.20 0.35 0.10 0.05 $55.00 4.00 14.00 8.00 0.50 $81.50 0.675 0.049 0.172 0.098 0.006 1.000 $33.75 2.45 8.60 4.90 0.30 $50.00 0.3375 0.1225 0.2150 0.0613 0.0300 Costs of Destroyed Product Breasts: $0.3375 per pound × 40 pounds = $13.50 Wings: $0.1225 per pound × 15 pounds = 1.84 $15.34 (b). Physical measure method: Pounds of Product Weighting: Physical Measures Joint Costs Allocated Allocated Costs per Pound Breasts Wings Thighs Bones Feathers 100 20 40 80 10 250 0.400 0.080 0.160 0.320 0.040 1.000 $20.00 4.00 8.00 16.00 2.00 $50.00 $0.200 0.200 0.200 0.200 0.200 Costs of Destroyed Product Breast: $0.20 per pound × 40 pounds = $ 8 Wings: $0.20 per pound × 15 pounds = 3 $11 2. The sales-value at splitoff method captures the benefits-received criterion of cost allocation and is the preferred method. The costs of processing a chicken are allocated to products in proportion to the ability to contribute revenue. Quality Chicken’s decision to process chicken is heavily influenced by the revenues from breasts and thighs. The bones provide relatively few benefits to Quality Chicken despite their high physical volume. The physical measures method shows profits on breasts and thighs and losses on bones and feathers. Given that Quality Chicken has to jointly process all the chicken products, it is non-intuitive to single out individual products that are being processed simultaneously as making losses while the overall operations make a profit. Quality Chicken is processing chicken mainly for breasts and thighs and not for wings, bones, and feathers, while the physical measure method allocates a disproportionate amount of costs to wings, bones and feathers. Page 1 of 8
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16-17: Joint products and byproducts (continuation of 16-16). 1. Ending inventory: Breasts 15 × $0.3375 = $5.0625 Wings 4 × 0.1225 = 0.4900 Thighs 6 × 0.2150 = 1.2900 Bones 5 × 0.0613 = 0.3065 Feathers 2 × 0.0300 = 0.0600 $7.2090 2. Joint products
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This note was uploaded on 12/13/2010 for the course ACCY 201 taught by Professor Kevin during the Three '09 term at University of Wollongong, Australia.

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Week 12 - Accy211: Management Accounting II Autumn Session...

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