Davenport Company buys Alpha-11 for $6 a gallon. At the end of distilling in Dep
ID: 2597623 • Letter: D
Question
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.
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.)
Department (1) Distilling (2) Fusing (3) Solidifying Cost of Alpha-11 $ 712,000 0 0 Direct labor 170,000 $ 343,000 $ 496,000 Manufacturing overhead 150,000 163,000 400,000Explanation / Answer
Solution:
Further Processing Cost for Beta 2 = $343,000 + $163,000 = $506,000
Further Processing Cost for Beta 3 = $496,000 + $400,000 = $896000
Total Joint Cost = Cost of Distilling Department = $712,000 + $170,000 + $150000 = $1,032,000
Computation of Net Realizable Value and allocation of Joint Cost
Particulars
Beta 1
Beta 2
Beta 3
Sales Value (A)
$728,000
$2,184,000
$3,276,000
Gallons Sold (B)
182000
364000
546000
Sale price per gallon ( C ) (A/B)
$4
$6
$6
Closing inventory of Gallons (D)
129000
0
187000
Production of Gallons ( E ) (B+D)
311000
364000
733000
Estimated Sales value of production (F) (E*C)
$1,244,000
$2,184,000
$4,398,000
Further Processing Cost (G)
$0
$506,000
$896,000
Net Realizable Value (H) (F-G)
$1,244,000
$1,678,000
$3,502,000
Allocation of Joint Cost
(Total Joint Cost * NRV for product / Total NRV)
$199,845.58
$269,566.63
$562,587.80
From above workings:
a. Net realizable value for Beta 1 = $1,244,000
b. The Joint Cost to be allocated = $1,032,000
c. Total cost of Beta 2 Sold = $269,566.63 + $506,000 = $775,566.63
d. Value of ending inventory for Beta 1:
Sale Value = 129000 * 4 = $516,000
Cost of ending inventory = 199845.58/311000*129000 = $82,894.15
Computation of Net Realizable Value and allocation of Joint Cost
Particulars
Beta 1
Beta 2
Beta 3
Sales Value (A)
$728,000
$2,184,000
$3,276,000
Gallons Sold (B)
182000
364000
546000
Sale price per gallon ( C ) (A/B)
$4
$6
$6
Closing inventory of Gallons (D)
129000
0
187000
Production of Gallons ( E ) (B+D)
311000
364000
733000
Estimated Sales value of production (F) (E*C)
$1,244,000
$2,184,000
$4,398,000
Further Processing Cost (G)
$0
$506,000
$896,000
Net Realizable Value (H) (F-G)
$1,244,000
$1,678,000
$3,502,000
Allocation of Joint Cost
(Total Joint Cost * NRV for product / Total NRV)
$199,845.58
$269,566.63
$562,587.80
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.