16 22 instant foods produces two types of

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Marketing 2018
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Chapter 18 / Exercise 10
Marketing 2018
Ferrell/Pride
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16-22 Instant Foods produces two types of microwavable products-beef-flavored ramen and shrimp-flavored ramen. The two products share common inputs such as noodle and spices. The production of ramen results in a waste product referred to as stock, which Instant dumps at negligible costs in a local drainage area. In June 2012, the following data were reported for the production and sales of beef-flavored and shrimp-flavored ramen: Joint Costs Joint costs (costs of noodles, spices, and other inputs and processing to split off point) $240,000 Beef Ramen Shrimp Ramen Beginning inventory (tons) 0 Production (tons) 10,000 20,000 Sales (tons) 10,000 20,000 Selling price per ton $10 $15 Due to the popularity of its microwavable products, Instant decides to add a new line of products that tar - gets dieters. These new products are produced by adding a special ingredient to dilute the original ramen and are to be sold under the names Special B and Special S, respectively. The following is the monthly data for all the products: Joint Costs Special B Special S Joint costs (costs of noodles, spices, and other inputs and processing to split off point) $240,000 Separable costs of processing 10,000 tons of Beef Ramen into 12,000 tons of Special B $48,000 Separable cost of processing 20,000 tons of Shrimp Ramen into 24,000 tons of Special S $168,000 Beef Ramen Shrimp Ramen Special B Special S Beginning inventory (tons) 0 0 Production (tons) 10,000 20,000 12,000 24,000 Transfer for further processing (tons) 10,000 20,000 Sales (tons) 12,000 24,000 Selling price per ton $10 $15 $18 1. Calculate Instant's gross-margin percentage for Special B and Special S when joint costs are allocated using the following: a. Sales value at split off method. b. Physical-measure method. c. Net realizable value method. 2. Recently, Instant discovered that the stock it is dumping can be sold to cattle ranchers at $5 per ton. In a typical month with the production levels shown, 4,000 tons of stock are produced and can be sold by incurring marketing costs of $10,800. Sherrie Dong, a management accountant, points out that treating the stock as a joint product and using the sales value at split off method, the stock product would lose about $2,228 each month, so it should not be sold. How did Dong arrive at that final number, and what do you think of her analysis? Should Instant sell the stock? 0 0 0 $25
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Chapter 18 / Exercise 10
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16-27 The Southern Oil Company buys crude vegetable oil. Refining this oil results in four products at the split off point A, B, C, and D. Product C is fully processed by the split off point. Products A, B, and D can individually be further refined into Super A, Super B, and Super D. In the most recent month (December), the output at the split off point was as follows: Product A, 322,400 gallons Product B, 119,600 gallons Product C, 52,000 gallons Product D, 26,000 gallons The joint costs of purchasing and processing the crude vegetable oil were $96,000. Southern had no beginning or ending inventories. Sales of product C in December were $24,000. Products A, B, and D were further refined and then sold. Data related to December are as follows: Separable Processing Costs to Make Super Products Revenues Super A $249,600 $300,000 Super B $102,400 $160,000 Super D $152,000

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