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Fletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into...
Fletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into production in Department X, and at the end of processing in this department, three products appear. Product A is sold at the split-off point with no further processing. Products B and C require further processing before they are sold. Product B is processed in Department Y, and product C is processed in Department Z. The company uses the estimated net realizable value method of allocating joint production costs. Following is a summary of costs and other data for the quarter ended June 30.
No inventories were on hand at the beginning of the quarter. No raw material was on hand at June 30. All units on hand at the end of the quarter were fully complete as to processing.
| Products | A | B | C | ||||||
| Pounds sold | 21,000 | 62,000 | 72,000 | ||||||
| Pounds on hand at June 30 | 53,000 | 0 | 40,000 | ||||||
| Sales revenues | $ | 48,300 | $ | 310,000 | $ | 396,000 | |||
| Departments | X | Y | Z | ||||||
| Raw material cost | $ | 162,000 | $ | 0 | $ | 0 | |||
| Direct labor cost | 71,000 | 94,000 | 281,500 | ||||||
| Manufacturing overhead | 29,000 | 31,500 | 108,000 | ||||||
Required:
a. Determine the following amounts for each product: (1) estimated net realizable value used for allocating joint costs, (2) joint costs allocated to each of the three products, (3) cost of goods sold, and (4) finished goods inventory costs, June 30.
b. Assume that the entire output of product A could be processed further at an additional cost of $5.80 per pound and then sold for $12.30 per pound. Compute the incremental income from further processing A.
c. Considering the results of part b, should
the company process product A further?
Solutions
Expert Solution
| a. | ||||||||||
| 1 | Sales revenue per pound: | |||||||||
| A | B | C | ||||||||
| Sales revenues | a | 48300 | 310000 | 396000 | ||||||
| Pounds sold | b | 21000 | 62000 | 72000 | ||||||
| Sales revenue per pound | a/b | 2.3 | 5 | 5.5 | ||||||
| Estimated net realizable value: | ||||||||||
| A | B | C | Total | |||||||
| Pounds produced | a | 74000 | 62000 | 112000 | ||||||
| (Pounds sold+Pounds on hand at June 30) | (21000+53000) | (62000+0) | (72000+40000) | |||||||
| Sales revenue per pound: | b | 2.3 | 5 | 5.5 | ||||||
| Sales revenues for the pound produced | c=a*b | 170200 | 310000 | 616000 | ||||||
| Less: Separate processing cost | 0 | 125500 | 389500 | |||||||
| (Direct labor cost+Manufacturing overhead) | (94000+31500) | (281500+108000) | ||||||||
| Estimated net realizable value | 170200 | 184500 | 226500 | 581200 | ||||||
| % for allocation (As a % of total NRV) | 29.28% | 31.74% | 38.97% | |||||||
| 2 | Joint costs=All the costs at department X=162000+71000+29000=$ 262000 | |||||||||
| Allocation of joint cost (Based on estimated NRV): | ||||||||||
| $ | ||||||||||
| A | 262000*29.28% | 76714 | ||||||||
| B | 262000*31.74% | 83159 | ||||||||
| C | 262000*38.97% | 102101 | ||||||||
| 3 | A | B | C | |||||||
| Joint cost allocated | 76714 | 83159 | 102101 | |||||||
| Separate processing cost | 0 | 125500 | 389500 | |||||||
| Total cost | a | 76714 | 208659 | 491601 | ||||||
| Pounds produced | b | 74000 | 62000 | 112000 | ||||||
| Cost per pound | c=a/b | 1.04 | 3.37 | 4.39 | ||||||
| Pounds sold | d | 21000 | 62000 | 72000 | ||||||
| Cost of goods sold | c*d | 21770 | 208659 | 316029 | ||||||
| 4 |
 ekkarill92 answered 1 year agoRelated SolutionsFletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into...Fletcher Fabrication, Inc., produces three products by a joint
production process. Raw materials are put into production in
Department X, and at the end of processing in this department,
three products appear. Product A is sold at the split-off point
with no further processing. Products B and C require further
processing before they are sold. Product B is processed in
Department Y, and product C is processed in Department Z. The
company uses the estimated net realizable value method of...
Fletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into...Fletcher Fabrication, Inc., produces three products by a joint
production process. Raw materials are put into production in
Department X, and at the end of processing in this department,
three products appear. Product A is sold at the split-off point
with no further processing. Products B and C require further
processing before they are sold. Product B is processed in
Department Y, and product C is processed in Department Z. The
company uses the estimated net realizable value method of...
Fletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into...Fletcher Fabrication, Inc., produces three products by a joint
production process. Raw materials are put into production in
Department X, and at the end of processing in this department,
three products appear. Product A is sold at the split-off point
with no further processing. Products B and C require further
processing before they are sold. Product B is processed in
Department Y, and product C is processed in Department Z. The
company uses the estimated net realizable value method of...
Fletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into...Fletcher Fabrication, Inc., produces three products by a joint
production process. Raw materials are put into production in
Department X, and at the end of processing in this department,
three products appear. Product A is sold at the split-off point
with no further processing. Products B and C require further
processing before they are sold. Product B is processed in
Department Y, and product C is processed in Department Z. The
company uses the estimated net realizable value method of...
2. In industries that process joint products, the costs of the raw materials inputs and the...2. In industries that process joint products, the costs of the
raw materials inputs and the sales values of intermediate and final
products are often volatile. Change the data area of your worksheet
to match the following:
Chapter 12: Applying Excel
Data
Exhibit 12-7 Santa Maria Wool
Cooperative
Cost of wool
$210,000
Cost of separation process
$40,000
Sales value of intermediate products at
split-off point:
Undyed coarse wool
$127,000
Undyed fine wool
$163,000
Undyed superfine wool
$57,000
Costs of further...
2. In industries that process joint products, the costs of the raw materials inputs and the...2.
In industries that process joint products, the costs of the raw
materials inputs and the sales values of intermediate and final
products are often volatile. Change the data area of your worksheet
to match the following:
hapter 07: Applying Excel
2
3
Data
4
Exhibit 7-6 Santa Maria Wool Cooperative
5
Cost of wool
$192,000
6
Cost of separation process
$40,000
7
Sales value of intermediate products at split-off point:
8
Undyed coarse wool
$110,000
9
Undyed fine wool...
2. In industries that process joint products, the costs of the raw materials inputs and the...2. In industries that process joint products, the costs of the
raw materials inputs and the sales values of intermediate and final
products are often volatile. Change the data area of your worksheet
to match the following:
A
B
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Chapter 6: Applying Excel
Data
Exhibit 6-7 Santa Maria Wool
Cooperative
Cost of wool
$233,000
Cost of separation process
$40,000
Sales value of...
ABC Company produces three products in a joint production process. At the split-off point, all three...
ABC Company produces three products in a joint production process.
At the split-off point, all three products are produced further and
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Before Molecue is sold, it must be purified...
BioMorphs Corporation produces three products in a monthly joint production process. During the first stage of...BioMorphs Corporation produces three products in a monthly joint
production process. During the first stage of the process liquids
and chemicals costing $78,400 are heated and three different
compounds emerge: 3,000 gallons of Molecue worth $22 per gallon are
created from the steam; 10,000 gallons of Borphue worth $15 are
drained from the tank; and 1,000 gallons of the tank residue,
labeled as Polygard, are sold as fertilizer for $7.50 per gallon.
Before Molecue is sold, it must be purified...
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