Chapter 16 solutions

Chapter 16 solutions - 16-16(20-30 min.) Joint-cost...

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Unformatted text preview: 16-16(20-30 min.) Joint-cost allocation, insurance settlement.1.(a)Sales value at splitoff method:PoundsofProductWholesaleSelling Priceper PoundSalesValueat SplitoffWeighting:Sales Valueat SplitoffJointCostsAllocatedAllocatedCosts perPoundBreastsWingsThighsBonesFeathers10020408010250$0.550.200.350.100.05$55.004.0014.008.00.50$81.500.6750.0490.1720.098.0061.000$33.752.458.604.90.3$5.000.33750.12250.21500.06130.0300Costs of Destroyed ProductBreasts: $0.3375 per pound 40 pounds = $13.50Wings: $0.1225 per pound 15 pounds = 1.84$15.34b.Physical measure method:Poundsof ProductWeighting:Physical MeasuresJoint CostsAllocatedAllocated Costs per PoundBreastsWingsThighsBonesFeathers100204080102500.4000.0800.1600.3200.0401.000$20.004.008.0016.002.00$50.00$0.2000.2000.2000.2000.200Costs of Destroyed ProductBreast: $0.20 per pound 40 pounds=$ 8Wings: $0.20 per pound 15pounds=3$11Note: Although not required, it is useful to highlight the individual product profitability figures:Sales Value atSplitoff MethodPhysical Measures MethodProductSales ValueJoint CostsAllocatedGross IncomeJoint CostsAllocatedGrossIncome16-1BreastsWingsThighsBonesFeathers$55.004.0014.008.000.50$33.752.458.604.900.30$21.251.555.403.100.20$20.004.008.0016.002.00$35.000.006.00(8.00)(1.50)16-22.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 Chickens 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.16-17(10 min.) Joint products and byproducts (continuation of 16-16).1. Ending inventory:Breasts15$0.3375 =$5.06Wings 40.1225 =0.49Thighs60.2150 =1.29Bones 50.0613 =0.31Feathers20.0300 =0.06$7.212. Joint productsByproductsNet Realizable Values of byproducts:BreastsWingsWings$ 4.00ThighsBonesBones8.00FeathersFeathers.50$12.50Joint costs to be allocated:Joint costs Net Realizable Values of byproducts = $50 $12.50 = $37.50PoundsofProductWholesaleSelling Priceper PoundSalesValueat SplitoffWeighting:Sales Valueat SplitoffJointCostsAllocatedAllocatedCosts PerPoundBreast100$0.55$5555 69$29.89$0.2989Thighs400.351414 697.610.1903$69$37.5Ending inventory:Breasts 15 $0.2989$4.48Thighs 6 0.19031.14$5.623. Treating all products as joint products does not require judgments as to whether a product...
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This document was uploaded on 11/03/2011 for the course ACCOUNTING 451 at Rutgers.

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Chapter 16 solutions - 16-16(20-30 min.) Joint-cost...

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