Question

Exercise 22-22C Assigning joint product costs LO C3 Pirate Seafood Company purchases lobsters and processes them into tails and flakes. It sells the lobster tails for $19.30 per pound and the flakes for $14.40 per pound. On average, 100 pounds of lobster are processed into 56 pounds of tails and 28 pounds of flakes, with 16 pounds of waste. Assume that the company purchased 3,600 pounds of lobster for $4 per pound and processed the lobsters with an additional labor cost of $6,200. No materials or labor costs are assigned to the waste. If 1,879 pounds of tails and 936 pounds of flakes are sold, calculate the allocated cost of the sold items and the allocated cost of the ending inventory. The company allocates joint costs on a value basis. (Round your answers to nearest whole number. Round cost per pound answers to 2 decimal places.)

Answer 1

Solution

Pirate Seafood Company

Calculation of the allocated cost of the sold items and the allocated cost of the ending inventory:

	Yield per 3,600 lb. purchase	Market value per 3,600 lb. Purchase		Percent of Market Value		Cost to be allocated	Allocated Cost 3,600 lbs	Cost per pound
			Numerator	Denominator	% of market value
Lobster Tails	2,016	$38,909	$38,909	53,424	72.83%	$20,600	$15,003	$7.44
Lobster Flakes	1,008	$14,515	$14,515	53,424	27.17%	$20,600	$5,597	$5.55
Total		$53,424					$20,600

Notes:

1. Computation of yield –

Tails – 3,600 x 56/100 = 2,016 lbs

Flakes – 3,600 x 28/100 = 1,008 lbs

1. market price –

Tails – 2,016 x $19.30 = $38,909

Flakes – 1,008 x $14.40 = $14,515

1. total costs to be allocated –

purchase price, 3,600 x 4 = $14,400

labor cost = $6,200

total cost = $20,600

Determination of allocated cost of sold items:

	Cost per Pound	Pounds Sold	Cost of Goods Sold
Lobster Tails	$7.44	1,879	$13,980
Lobster Flakes	$5.55	936	$5,195
Total			$19,175

Determination of allocated cost of ending inventory:

	Cost per Pound	Pounds in Ending Inventory	Cost of Ending Inventory
Lobster Tails	$7.44	137	$1,019
Lobster Flakes	$5.55	72	$400
Total			$1,419