Joint Products: Problem A: California Soy buys beans and processes them into soy
ID: 2454929 • Letter: J
Question
Joint Products:
Problem A:
California Soy buys beans and processes them into soy meal and soy oil. One ton of soy beans can be processed into 60 gallons of soy meal and 90 gallons of soy oil at a cost of $500. A gallon of soy meal can be sold for $2.00. A gallon of soy oil can be sold (in bulk) for $4.00.
California Soy then processes the 60 gallons of soy meal into 500 ounds of soy cookies at an additional cost of $300. Soy cookies are sold for $2 per pound. The 90 gallons of soy oil is ultimately poackaged (at a cost of $200) into 400 quarts of Soyola. Each quart of Soyola is sold for $1.25.
Show calculations for the following to receive credit:
1. How much of the joint costs should be allocated to soy meal under the Physcial Unit Method?
2. How much of the joint costs should be allocated to soy meal under the Sales Value at Split-off Method?
3. How much of the joing costs should be allocated to Soyola under the Net Realizable Value Method?
Assuming every pound of cookies and all quarts of Soyola produced made from a ton of soy bean are sold -
4. What would gross profit be for Soy Cookies under the Physcial Unit Method?
5. What would gross profit be for Soy Cookies under the Sales Value at Split-off Method?
6. What would gross profit be for Soyola under the Net Realizable Value Method?
7. What is the incremental profit (or loss) for California Soy when soy meal is further processed into soy cookies?
8. What is the incremental profit (or loss) for California Soy when soy oil is further processed into Soyola?
Problem B:
Tasty, Inc. is a producer of potato chips. A single production process at Tasty yields potato chips as the main product and a by-product (Bits O' Chips) that can be sold as a snack. Both prodcuts are fully processed by the split-off point. There are no separable costs.
For September, the total cost of manufacturing was $500,000.
1. What is the gross profit for September under the Net Realizable Value Method?
2. What is the gross profit for September under the Manufacturing Cost Reduction Method?
3. What is the total inventory value at 9/30 under the Net Realizable Value Method?
4. What is the total inventory value at 9/30 under the Manufacturing Cost Reduction Method?
Explanation / Answer
Answer to 1 $ 2
Answer to 3:
Answers to 4, 5 and 6
7)
Incremental sales = ($1000 - $120) = $880
Incremental Cost = $300
Incemental Profit = $580
8)
Incremental sales = ($500 - $360) = $ 140
Incremental Cost = $200
Incemental loss = ($60)
Joint cost = $500 Product Soy Meal Soy Oil Physical Units (gallons) 60 90 Sales ($) Soy Meal (@$2 per gallon) 120 Soy Oil (@ $4 per gallon) 360 Joint cost aportioned on the basis of physical units ( 60: 90) ($) 200 300 Joint cost aportioned on the basis of sale value at split of points ( 120:360) ($) 125 375Related Questions
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