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In: Accounting

Shaffner Corporation produces three products, Alfa, Beta and Gama. Alfa and Gama are joint products, while...

Shaffner Corporation produces three products, Alfa, Beta and Gama. Alfa and Gama are joint products, while Beta is a by-product of Alfa. There is no combined fee to be allocated to the by-product. The production process for the current year is as follows:

a. In Department 1, 110,000 pounds of Rho raw material are processed, with a total cost of $ 120,000. After processing, 60% of the units are transferred to Department 2, and 40% of the units (now called Gama) are transferred to Department 3.

b. In Department 2, the product is further processed at an additional cost of $ 38,000. 70% of the units (now called Alfa) are transferred to Department 4 and 30% of the units are by-products (Beta) which are sold at a price of $ 1.20 per pound. Marketing expenses related to Beta are $ 8100.

c. In Department 4, Alfa is processed at an additional cost of $ 23,660. After the process is complete, Alfa is ready to sell for $ 5 per pound.
d. In Department 3, Gama is processed with an additional fee of $ 165,000. Within the department there is a normal loss of the Gama unit, which is 10% of the output unit. The remaining units sell for $ 12 per pound.

Requested:
1. What is the cost per unit for Alfa and Gama? Assume that by-products increase sales from Alfa.
2. What is the ending inventory if Alfa and Gama sold 30,000 units each?

Solutions

Expert Solution

PARTICULARS TOTAL ALFA GAMA BETA
DEPARMENT-1 (60 :40 RATIO) 110000 66000 44000
DEPARMENT-2( 70%- ALFA & 30 %-BETA ) 66000 46200 0 19800
DEPARMENT-3 44000 0 44000 0
DEPARMENT-4 46200 46200 0 0
TOTAL UNIT PRODUCED 110000
NORMAL LOSS @ 10% IN GAMA 4400 4400 0
ACTUAL UNIT PRODUCED IN TOTALITY 85800 46200 39600 19800
COST ALFA GAMA
DEPARMENT-1 120000 72000 48000
DEPARMENT-2 38000 38000 0 8100
DEPARMENT-3 165000 0 165000
DEPARMENT-4 23660 23660 0
TOTAL COST 346660 133660 213000 8100
COST PER UNIT                      2.89             5.38                      0.41
UNITS SOLD 30000 30000
ENDING INVENTORY 16200 9600
NOTE:- COST AND SALES OF BETA NOT CONSIDERED IN ABOVE CALCULATIONS. BETA SALES AS BELOW
SALES UNITS COST SALES
19800 8100 23760

ekkarill92 answered 2 years ago
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