Philsbury Company buys 12,000 units of standard flour for $140,000 and refines it using a special...

Philsbury Company buys 12,000 units of standard flour for $140,000 and refines it using a special sifting process. One unit of standard flour can be turned into 3 cups of baking flour and 9 cups of bread flour.

The baking flour can be sold for $4.60 per cup and the bread flour for $3.10 per cup at split-off point..

Philsbury puts the baking flour through a second process so it becomes super fine. This costs an additional $0.75 per cup of baking flour and the process yields ½ cup of super-fine baking flour for every one cup of baking flour used. The super-fine baking flour sells for $10.00 per cup.

Required:

Allocate the joint cost to the super-fine baking flour and the bread flour using the following:

a. Physical-measure method (using cups) of joint-cost allocation

b. Sales value at splitoff method of joint-cost allocation

c. NRV method of joint-cost allocation

d. Using the NRV method of joint-cost allocation used in section c above, determine the gross margin if 10,000 cups of the super fine baking flour and all of the bread flour is sold.

Expert Solution

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ekkarill92 answered 2 years ago

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