Question

In: Accounting

Davenport Company buys Alpha-11 for $6 a gallon. At the end of distilling in Department A,...

Davenport Company buys Alpha-11 for $6 a gallon. At the end of distilling in Department A, Alpha-11 splits off into three products: Beta-1, Beta-2, and Beta-3. Davenport sells Beta-1 at the split-off point, with no further processing; it processes Beta-2 and Beta-3 further before they can be sold. Beta-2 is fused in Department B, and Beta-3 is solidified in Department C. Following is a summary of costs and other related data for the year ended November 30.

Department (1) Distilling (2) Fusing (3) Solidifying
Cost of Alpha-11 $ 712,000 0 0
Direct labor 177,000 $ 339,000 $ 497,000
Manufacturing overhead 140,000 164,000 407,000
Products Beta-1 Beta-2 Beta-3
Gallons sold 185,000 370,000 555,000
Gallons on hand at year-end 121,000 0 188,000
Sales $ 740,000 $ 2,220,000 $ 3,330,000

Davenport had no beginning inventories on hand at December 1 and no Alpha-11 on hand at the end of the year on November 30. All gallons on hand on November 30 were complete as to processing. Davenport uses the net realizable value method to allocate joint costs.

Required:

Compute the following:

a. The net realizable value of Beta-1 for the year ended November 30.

b. The joint costs for the year ended November 30 to be allocated.

c. The cost of Beta-2 sold for the year ended November 30. (Do not round intermediate calculations.)

d. The value of the ending inventory for Beta-1. (Do not round intermediate calculations.)

Solutions

Expert Solution

Allocation of distilling cost to products:
1)Distilling Cost Beta-1 Beta-2 Beta-3 Total
Gallons sold 185000 370000 555000
Gallons on hand at year end 121000 0 188000
Units produced 306000 370000 743000 1419000
Allocation of distilling cost
$1,029,000         221,899         268,309         538,793
A. Net realizable value of Beta 1:
518101
($740000-$221899)
B. Joint cost is distilling cost which is already calculated and allocated in part A.
C.Beta 2 has incurred cost in distilling department and fusing department.
Allocation of fusing Cost
Beta 2 Beta 3 Total
Units produced 370000 743000 1113000
Allocation of fusion cost $167,215 $335,785
$503,000
Cost of Beta 2 sold=$268309+$335785=$604094.
D. Value of ending inventory for Beta-1=(221899/306000*121000)=87744
Allocation of distilling cost to products:
1)Distilling Cost Beta-1 Beta-2 Beta-3 Total
Gallons sold 185000 370000 555000
Gallons on hand at year end 121000 0 188000
Units produced 306000 370000 743000 1419000
Allocation of distilling cost
$1,029,000         221,899         268,309         538,793
A. Net realizable value of Beta 1:
518101
($740000-$221899)
B. Joint cost is distilling cost which is already calculated and allocated in part A.
C.Beta 2 has incurred cost in distilling department and fusing department.
Allocation of fusing Cost
Beta 2 Beta 3 Total
Units produced 370000 743000 1113000
Allocation of fusion cost $167,215 $335,785
$503,000
Cost of Beta 2 sold=$268309+$335785=$604094.
D. Value of ending inventory for Beta-1=(221899/306000*121000)=87744

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