31 would be lumber 30000 bf x 2 60000 an additional

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Managerial Accounting
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Chapter 5 / Exercise 9
Managerial Accounting
Warren/Tayler
Expert Verified
31 would be: Lumber (30,000 BF x $2) $60,000An additional inventory of 100 logs’ worth of scrap is on hand at an estimated value of $10 each, or $1,000 total. This value is not recognized in the accounting records.
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Managerial Accounting
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Chapter 5 / Exercise 9
Managerial Accounting
Warren/Tayler
Expert Verified
9-10 Cost Management B. Income Statement With By-Product Value Recognized at the Time of Production Value of inventory for the main product: Joint product costs incurred $600,000 Less NRV of by-product (1,000 logs x $10) 10,000Net joint product cost $590,000Product cost per board foot ($590,000/300,000 bd ft) $1.966667Income statement: Revenue (270,000 BF x $3.00) $810,000 Cost of Goods Sold (270,000 BF x $1.966667) 531,000Gross Margin $279,000Although the problem does not call for this calculation, the ending inventories at March 31 would be: Lumber (30,000 BF x $1.966667) $59,000 By-product (100 logs x $10) 1,000Total Inventory $60,000Notice that there is no difference between gross margins or total inventory under the two methods. This will be true only under rigid conditions: (1) the proportion of main products sold is equal to the proportion of by-products sold during the period, and (2) there is either no beginning inventory or by-products in beginning inventory are sold for the exact amount estimated during the prior period. However, as long as by-product values are immaterial, the methods have little effect on the income statement and balance sheet. 9.23 The Paint Palette Company A. Physical output method: For Premium: (30% * $10,000) $ 3,000 For regular: (70% * $10,000) 7,000Total allocated $10,000B. NRV method For premium [30%*1,000 gallons * ($20 - $4)] $ 4,800 For regular [70%*1,000 gallons * ($10 $1) 6,300Total NRV $11,100
Chapter 9: Joint Product and By-Product Costing 9-11 Allocation: Allocated to premium ($4,800/$11,100)*$10,000 $ 4,324 Allocated to regular ($6,300/$11,100)*$10,000 5,676Total allocated costs $10,000C. Constant Gross Margin NRV Method First, determine gross margin percentage: Total revenue ($20 x 300 + $10 x 700) $13,000 Less: Separable costs ($4 x 300 + $1 x 700) $ 1,900 Common costs 10,00011,900Gross margin $ 1,100Gross margin percentage ($1,100/$13,000) 8.46153% Next, allocate common cost: PremiumRegularTotalRevenue $6,000 $7,000 $13,000 Gross Margin (508) (592) (1,100) Separable costs (1,200) (700) (1,900) Allocated Common Cost $4,292$5,708$10,000D. Compare the contribution per gallon of the two alternatives: Contribution per gallon if processed further ($22 - $11 - $1) $10 Continue with current process: ($10 - $1) 9Increase in contribution per gallon if process further $ 19.24 The Chile Salsa Company This problem can be solved in a series of steps, where the answers for some parts are needed to answer others. If joint costs are allocated based on the sales value at split-off point method, the joint costs for Spicy Hot are: ($25,000/$100,000) * $60,000 = $15,000 (1) Therefore, the joint cost for Medium is ($60,000 - $24,000 - $15,000) = $21,000 (2) Now the values for sales at split-off for medium and mild can be calculated: Medium: [($21,000/$60,000)*$100,000] = $35,000 (3) Mild: ($100,000 - $35,000 - $25,000) = $40,000 (4)
9-12 Cost Management Mild Medium Spicy Hot Total Units produced 24,000 ? ? 48,000 Joint costs $24,000 (2)$21,000 (1)$15,000 $60,000 Sales value at split-off point (4) $40,000 (3) $35,000 $25,000 $100,000 Additional cost if process further $9,000 $7,000 $5,000 $21,000 Sales value if processed further $55,000 $45,000 $30,000 $130,000 Notice that the information about units produced was irrelevant in this problem. 9.25 Conrad Miller A. Allocation for Very Flexible under the sales value at split-off point method: $120/000/($840,000 + $540,000 + $120,000) * $900,000 = $72,000 Gross profit: Revenue Separable costs Allocated joint costs = $135,000 - $12,000 - $72,000 = $51,000

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