dditional Activit Question 1 Fruities Company processes fruit into juice, canned
ID: 2409610 • Letter: D
Question
dditional Activit Question 1 Fruities Company processes fruit into juice, canned fruit, and cordial. During the summer of 2015, the joint costs of processing the fruit were $470,000. There were no beginning or ending inventories for the summer. Production and sales value information for the summer is as follows ProductCases uice anned ordial Sales Value @ Splitoff Point $26 per case $10 per case $5 per case Selling Price $26 per case $28 per case $10 per case Separable 100,000 150,000 180,000 $5.00 per case $2.50 per case Required Allocate the joint costs to each product using the estimated net realisable value (NRV) method Determine the inventoriable cost per case for each product. Would the allocation differ if the sales value @ split-off method was used to allocate the joint costs? Explain briefly If management of Fruities had the option to process the cordial further by adding water and 'bubbles' for an additional processing cost of $0.50 per case and a selling price of $12 per case, should the management process further? Why or Why not? Briefly explain and provide supporting calculations a. b. c. d. Question 2 The Canada Company prepares timber for companies who manufacture furniture The main product is plywood with a by-product of matchsticks. The by-product is sold to matchmakers For July, the manufacturing process incurred $432,000 in total manufacturing costs Ninety thousand metres of plywood was produced and sold along with 6,800 kilograms of matchsticks. The plywood sold for $7.00/metre and the matchsticks sold for $0.60/kilogram. There were no beginning or ending inventories of the main or the by- product. Required a. Calculate Canada Company's Gross Margin showing I. the byproduct as a cost reduction during production II. the byproduct as a revenue item when sold Explain the difference between the two methods of accounting for byproducts and when each should ideally be used b.Explanation / Answer
Solution for Question-1
Yes allocation of Joint cost on specific product will be differ due to adopting Sales @ split off method because percentage of allocation was completely changes in Sales value @ split off method as compare with NRV method
d,Revised Selling Price after Processing will be $12 per cases , means Additional revenue of $2 per Case and additional cost of further processing will be $0.50/Case. Hence , net Incremental benefit will be ( $2-$0.50)= $1.50 . It's advisable to further process the Cordial
Note: As per Chegg Only First question with 4 part can be solved.
a)Allocation of Joint Cost on NRV Basis Product Percentage Joint Costs Allocated Catsup 35.14% $470,000 $165,158 Juice 46.62% $470,000 $219,114 Canned 18.24% $470,000 $85,728 $470,000 Note: Refer Working Note-1Related Questions
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