Question

In: Accounting

1) Rainbow Ltd. manufactures two industrial compounds. In the month of May, 15,000 litres of direct...

1) Rainbow Ltd. manufactures two industrial compounds. In the month of May, 15,000 litres of direct material costing $160,000 were processed at a cost of $400,000. The joint process yielded 16,000 containers of a compound known as Jarlon and 4,000 containers of a compound known as Kharton. The respective selling prices of Jarlon and Kharton are $38 and $58. Both products may be processed further. Jarlon may be processed into Jaxton at an incremental cost of $8 per jar of the final product while Kharton may be processed into Kraxton at an additional cost of $32 per jar of the final product. The volume of jars of the final product are: 12,000 and 3,000 for Jaxton and Kraxton respectively. The selling price of Jaxton is $48 per jar. The selling price of Kraxton is $102 per jar.

A) Using the sales value at splitoff method, the percentage weightings for joint cost allocations for Jarlon and Kharton respectively are?

B) Using the sales value at splitoff, the joint costs allocated to Jarlon would be?

C) Using the sales value at splitoff method, the joint costs allocated to Kharton would be?

D) Assuming Cranbrook uses the sales value at splitoff method and 2,000 containers of Jarlon and 75 containers of Kharton are unsold at the end of the period, Cranbrook would report ending inventory of?

Solutions

Expert Solution

Required A

Sales Value at Splitoff point of Jarlon for may = 16000 containers * $38 per containers

= $608,000

Sales Value at Splitoff point of Kharton for may = 4000 containers * $58 per containers

= $232,000

Percentage weight of Joint Cost allocated to Jarlon = $608,000 / ($608,000+$232,000) * 100 = 72.38%

Percentage weight of Joint Cost allocated to Kharton = $232,000 / ($608,000+$232,000) * 100 = 27.62%

Required B

Total Joint Cost = $160,000 + $400,000 = $560,000

Joint costs allocated to Jarlon = $560,000* 72.38% = $405,328

Required C

Total Joint Cost = $160,000 + $400,000 = $560,000

Joint costs allocated to Kharton = $560,000* 27.62% = $154,672

Required D

Cost of 2000 containers of Jarlon = $405,328 / 16000 * 2000 = $50,666

Cost of 75 containers of Kharton = $154,672 / 4000 * 75 = $2900

Total Ending Inventory = $50,666 + 2,900 = $53,566

For any clarification, please comment. Kindly Up Vote

ekkarill92 answered 1 year ago
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