Question
In: Accounting
Part I: Beverage Company makes two products, Hot and Cold. Annual joint processing costs incurred up...
Part I:
Beverage Company makes two products, Hot and Cold. Annual joint processing costs incurred up to the split off point total $100,000. At the split-off point, Hot can be sold for $10 per unit and Cold can be sold for $15 per unit. Each product can be processed further; Hot would require additional costs of $5 per unit and could then be sold for $14 per unit. Cold could be sold for $25 per unit if additional costs of $8 are incurred. Sales for the upcoming year are projected to be 5,000 units of Hot and 7,500 units of Cold.
Should the products be sold at the split off point or processed further?
Part II:
Sally’s Subs, Inc. is considering the purchase of a new delivery truck to increase the home delivery capacity of its business over the next five years. The following information related to the truck has been determined:
| Acquisition cost | $40,000 |
| Annual cash operating costs | 7,000/year for 5 years |
| Annual cash revenues | 20,000/year for 5 years |
| Expected salvage value | 10,000 at the end of Year 5 |
The above amounts are all pre-tax. For both tax and financial reporting purposes, the company plans to depreciate the truck using the straight-line method over five years, with no salvage value used in calculating annual depreciation. The company’s cost of capital is 14% and its tax rate is 30%. Sally’s plans to use the truck for five years, then sell it for its salvage value.
Calculate the net present value for the investment. Would you recommend the purchase of the truck?
Part III:
Postman Company began operations on April 1, 2020, and manufactured 2,500 units during the month with the following unit costs:
| Direct Materials | $7.50 |
| Direct Labor | 20.00 |
| Variable Overhead | 6.00 |
| Fixed Overhead | 16.00 |
| Variable selling costs | 2.50 |
Total fixed overhead is $40,000 per month; during April, 2,000 units were sold at a price of $85 and fixed selling/administrative expenses were $10,000.
- Calculate the unit cost using variable costing.
- Calculate the unit cost using absorption costing.
- Calculate the cost of the April 30 finished goods inventory using variable costing
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Cows Creamery Company makes two products from a common input. Joint processing costs up to the...
Cows Creamery Company makes two
products from a common input. Joint processing costs up to the
split-off point total $42,000 a year. The company allocates these
costs to the joint products on the basis of their total sales
values at the split-off point. Each product may be sold at the
split-off point or processed further. Data concerning these
products appear below:
Gooey Mooey
Wowie Cowie
Total
Allocated Joint processing costs
$22,000
$19,600
$41,600
Sales value at split-off point
$32,000
$28,000...
ABC Company makes two products from a common input. Joint processing costs up to the split-off...
ABC Company makes two products from a common input. Joint
processing costs up to the split-off point total $51,500 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product A
Product B
Total
Allocated joint processing costs
$
30,900
$
20,600
$
51,500
Sales value at split-off point...
Iaci Company makes two products from a common input. Joint processing costs up to the split-off...
Iaci Company makes two products from a common input. Joint
processing costs up to the split-off point total $48,900 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint
processing costs
$
19,100
$
29,800
$
48,900
Sales value...
Ibsen Company makes two products from a common input. Joint processing costs up to the split-off...
Ibsen Company makes two products from a common input. Joint
processing costs up to the split-off point total $46,000 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint processing costs
$
18,400
$
27,600
$
46,000
Sales value at split-off point...
Ibsen Company makes two products from a common input. Joint processing costs up to the split-off...
Ibsen Company makes two products from a common input. Joint
processing costs up to the split-off point total $48,000 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint processing costs
$
19,200
$
28,800
$
48,000
Sales value at split-off point...
Ibsen Company makes two products from a common input. Joint processing costs up to the split-off...
Ibsen Company makes two products from a common input. Joint
processing costs up to the split-off point total $50,500 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint
processing costs
$
30,300
$
20,200
$
50,500
Sales value at split-off
point...
Iaci Company makes two products from a common input. Joint processing costs up to the split-off...
Iaci Company makes two products from a common input. Joint
processing costs up to the split-off point total $42,000 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs
22,400
19,600
42,000
Sales value at split off
point
32,000
28,000 ...
bsen Company makes two products from a common input. Joint processing costs up to the split-off...
bsen Company makes two products from a common input. Joint
processing costs up to the split-off point total $51,500 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint
processing costs
$
30,900
$
20,600
$
51,500
Sales value at split-off
point...
Ibsen Company makes two products from a common input. Joint processing costs up to the split-off...
Ibsen Company makes two products from a common input. Joint
processing costs up to the split-off point total $47,700 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint
processing costs
$
18,600
$
29,100
$
47,700
Sales value at split-off
point...
bsen Company makes two products from a common input. Joint processing costs up to the split-off...
bsen Company makes two products from a common input. Joint
processing costs up to the split-off point total $53,700 a year.
The company allocates these costs to the joint products on the
basis of their total sales values at the split-off point. Each
product may be sold at the split-off point or processed further.
Data concerning these products appear below:
Product X
Product Y
Total
Allocated joint
processing costs
$
20,400
$
33,300
$
53,700
Sales value at split-off
point...
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