Chapter 16 Exercises

Step-by-Step Exercises

First, if the company has a byproduct that is accounted for at the time of production, subtract the net realizable value of the byproduct from joint costs.

Question 1

Mavin Company produces two joint products and a byproduct in a joint process that costs $250,000 up to the splitoff point. The byproduct is accounted for at the time of production. The byproduct could sell at splitoff for $5,000, but it is processed further at a total cost of $2,000 and sold after further processing for $8,000.

Calculate joint costs to be allocated to joint products.

 

Question 2

Wooten Corporation uses a joint process that costs $700,000 up to the splitoff point. This process results in four main products and a byproduct that is sold at splitoff for $15,000. The byproduct is accounted for at the time of sale.

Calculate joint costs to be allocated to joint products.

 

Question 3

Codor, Inc. manufactures three products in a joint process that also results in 2,000 pounds of a byproduct, which is accounted for at the time of production. Joint costs are $50,000. The byproduct sells for $2 per pound at splitoff.

Calculate the joint costs to be allocated to joint products.

Next, calculate the amount of the cost allocation base to be used to allocate the joint costs for each joint product.

Question 4

Damon Corporation manufactures three products in a joint process. Product A could sell at splitoff for $15 per pound, Product B for $7 per pound, and Product C for $9 per pound. However, all three products are processed further, costing $5 per pound for Product A, $6 per pound for Product B, and $2 per pound for Product C. The final sales price for Product A is $25 per pound, for Product B $12 per pound, and for Product C $15 per pound. This period, Damon produced 2,000 pounds of Product A, 1,000 pounds of Product B, and 2,000 pounds of Product C.

Calculate the amount of the cost allocation base to be used to allocate the joint costs for each joint product, first using sales value at splitoff as a base, then using net realizable value, then using pounds at splitoff.

Question 5

McClennan Company grows cucumbers, some of which they process further into pickles. After the cucumbers are picked, they are separated into those suitable for sale, which are worth $0.70 per pound at splitoff, and those suitable for pickling, which are worth $0.40 per pound at splitoff. This year, 500,000 pounds were suitable for sale, and 600,000 pounds were suitable for pickling. Cucumbers suitable for sale are sold at splitoff, while those suitable for pickling are pickled at a cost of $1 per jar. It takes 3 pounds to make a jar of pickles, and each jar sells for $2.50 per jar.

Calculate the amount of the cost allocation base to be used to allocate the joint costs for each joint product, first using sales value at splitoff as a base, then using net realizable value, then using pounds at splitoff.

Question 6

Prosea Company manufactures two chemicals, tudine and lodine, in a joint process. The process yields 4,000 pounds of tudine that could be sold for $150,000 at splitoff, and 2,000 pounds of lodine that could be sold for $600,000 at splitoff. Tudine is processed further at a cost of $30,000 into an adhesive that sells for $200,000, and lodine is processed further at a cost of $100,000 into a powder that sells for $740,000.

Calculate the amount of the cost allocation base to be used to allocate the joint costs for each joint product, first using sales value at splitoff as a base, then using net realizable value, then using pounds at splitoff.

Next, allocate the joint costs to the joint products.

Question 7

Joint costs of $100,000 are allocated to three products based on sales value at splitoff. Product A’s total sales value at splitoff is $250,000, Product B’s is $300,000, and Product C’s is $450,000.

Allocate the joint costs to the joint products.

Question 8

Joint costs of $500,000 are allocated to two products based on net realizable value. Total net realizable value was $600,000 for Product A and $650,000 for Product B.

Allocate the joint costs to the joint products.

Question 9

Joint costs of $1,800,000 are allocated to three products based on their weight. Twelve thousand pounds of Product A, 14,000 pounds of Product B, and 10,000 pounds of Product C were produced.

Allocate the joint costs to the joint products.

Finally, calculate the profitability of each joint product and overall company profit.

Question 10

Applard, Inc. grows apples that are either sold as-is or processed into applesauce or apple juice. Joint costs, allocated based on NRV, were $112,500 for apples (NRV of $150,000), $150,000 for applesauce (NRV of $200,000), and $52,500 for apple juice (NRV of $70,000).
A byproduct accounted for at the time of sale also had an NRV of $10,000.

Calculate the profitability of each joint product and overall company profit.

Question 11

Coleman Company manufactures three products in a joint process. Joint products are allocated based on sales value at splitoff, resulting in $350,000 in joint costs allocated to Product A, $320,000 to Product B, and $120,000 to Product C. Product A is processed further at a cost of $100,000 and sold for $400,000. Product B is processed further at a cost of $200,000 and sold for $600,000. Product C is processed further at a cost of $270,000 and sold for $420,000.

Calculate the profitability of each joint product and overall company profit.

Question 12

Mosaic produces two kinds of tiles in a joint process that yields 5,000 pounds of blue tiles and 2,000 pounds of black tiles. Joint costs are allocated based on weight, resulting in $150,000 in joint costs allocated to blue tiles and $60,000 allocated to black tiles. Blue tiles sell for $50 per pound and have separable processing costs of $8 per pound. Black tiles sell for $35 per pound and have separable processing costs of $6 per pound.

Calculate the profitability of each joint product and overall company profit.

Complete Problems

Question 13

Berman Technology produces electronic components in a process that is highly unstable. Precise conditions are necessary to produce Grade A components, which sell for $100 per unit. If manufacturing conditions are less than perfect, the result is Grade B components, which sell for $50 per unit, or Grade C components, which sell for $30 per unit. A byproduct of the production process is a liquid that can be used as a coolant, which sells for $5 per gallon. None of the products or byproducts require further processing after the splitoff point. Last period, 10,000 components were produced, costing $228,500. Twenty-five percent were rated Grade A, 45% Grade B, and 30% Grade C. Five hundred gallons of coolant resulted from the process as well. Berman accounts for byproducts at the time of production.

Determine the profitability of each main product after allocating joint costs using their sales value at splitoff, as well as the overall profitability of the company.

Engelbert Pharmaceuticals produces two drugs in a joint process that also results in a byproduct. The joint process costs $108,000, and results in three chemicals—10,000 grams of Chemical AZBP, which could sell at splitoff for $2 per gram; 20,000 grams of Chemical RQFN, which could sell at splitoff for $1.50 per gram; and 50,000 grams of Chemical LRZS (a byproduct), which sells at splitoff for $0.02 per gram. AZBP is processed into the drug Meozin at an additional cost of $40,000. Each pill requires 20 milligrams of AZBP and sells for $0.50 each. RQFN is processed into the drug Clopine at an additional cost of $150,000. Each pill requires 10 milligrams of RQFN and sells for $0.10 each.

Question 14

Determine the profitability of each main product after allocating joint costs using their sales value at splitoff, if the byproduct is accounted for at the time of production, as well as the overall profitability of the company.

Question 15

Determine the profitability of each main product after allocating joint costs using their net realizable value, if the byproduct is accounted for at the time of sale, as well as the overall profitability of the company.

Question 16

Bonanno, Inc. produces a cleaning chemical that is diluted to three different strengths and infused with different scents. The cleaning chemical costs $40,500 to process, producing enough cleaning chemical to make 5,000 bottles of Super Kitchen Cleaner, which costs an additional $10,000 to process further and sells for $4 per bottle, 4,000 bottles of Deluxe Bathroom Cleaner, which costs an additional $9,000 to process and sells for $5 per bottle, and 6,000 bottles of Extra Strong Super Deluxe All-Purpose Cleaner, which costs an additional $15,000 to process and sells for $8 per bottle.

Determine the profitability of each main product after allocating joint costs using their net realizable value, as well as the overall profitability of the company.

Parkle Corporation runs a mining operation that costs $300,000 per year. The mining yields precious stones that sell for $500 each, semi-precious stones that sell for $50 each, and ordinary stones that sell for $5 per bag, in bags containing approximately 1,000 stones. Ordinary stones are considered a byproduct of the mining operation. This year, the mining operation yielded 500 precious stones, 2,000 semi-precious stones, and 500,000 ordinary stones. All stones were sold at splitoff.

Question 17

Determine the profitability of each main product after allocating joint costs using volume, with the byproduct accounted for at the time of sale, as well as the overall profitability of the company.

Question 18

Determine the profitability of each main product after allocating joint costs using sales value at splitoff, with the byproduct accounted for at the time of production, as well as the overall profitability of the company.

Question 19

Fulco produces three main products (Products A, B, and C) in a joint process, which also results in a byproduct (Product D). Product A sells for $3.50 per pound, Product B sells for $5.00 per pound, and Product C sells for $6.00 per pound. All three products are made from SuperPlastic, a biodegradable plastic that Fulco manufactures. Last period, joint costs were $400,000 to produce 120,000 pounds of SuperPlastic (50% of which went to Product A, 30% to Product B, and 20% to Product C). The process also yielded 20,000 pounds of Product D, which sells for $0.70 per pound with no further processing. Product A also requires no further processing, but Product B must be processed further at a cost of $1.00 per pound, and Product C must be processed further at a cost of $1.25 per pound.

Determine the profitability of each main product after allocating joint costs using net realizable value, with the byproduct accounted for at the time of production, as well as the overall profitability of the company.

Assignment Problem

Note: Check figures are not provided for assignment problems so your instructor may use them for homework.

Question 20

Kingline Company produces three products in a joint process costing $1,000,000. Product 1 sells for $0.35 per ounce after further processing, which costs $0.10 per ounce. Product 2 sells for $1 per ounce at splitoff. Product 3 sells for $0.65 per ounce after further processing, which costs $0.25 per ounce. This period, 25,000 pounds of Product 1, 50,000 pounds of Product 2, and 30,000 pounds of Product 3 resulted from the joint process (there are 16 ounces in a pound). The joint process also results in 3,800 gallons of a byproduct that sells for $8 per gallon. Kingline uses the net realizable value of their products to allocate joint costs and accounts for byproducts at the time of production.

Determine the profitability of each main product after allocating joint costs, as well as the overall profitability of the company.

 

Challenge Problem

Question 21

Xylon Industries manufactures chemicals in a three-step procedure. After processing in the Mixing Department, 20% of the total weight of materials is split off to be processed into Xylite. The remainder of the materials are transferred to the Heating Department. The heating process results in a 5% loss in weight. After heating, 50% of the remaining weight of materials is split off to be processed into Xerite. The rest of the materials are transferred to the Treating Department. After treating, 60% of the remaining materials are processed into Xonite, 30% are processed into Ximite, and 10% are processed into Xaphite.

Further processing into the final products results in the following costs after splitoff and final sales prices:

Item	Additional cost	Selling price
Xylite	$3 per pound	$9 per pound
Xerite	$10 per pound	$20 per pound
Xonite	$2 per pound	$12.50 per pound
Ximite	$7 per pound	$25 per pound
Xaphite	$6 per pound	$17 per pound

This period, 40,000 pounds of materials costing $90,000 were started into the production
process. All joint costs are allocated based on pounds, on a stage-by-stage basis, with unallocated costs carried forward to the next stage.

Determine the profitability of each main product after allocating joint costs, as well as the overall profitability of the company.

Pre-Assessment Problem

Use this problem to check whether you are fully prepared for the assessment. Work the problem under assessment conditions – don’t use any notes or other materials!

Question 22

Decolia produces two main products (WizBang and PowWow) in a joint process, which also results in a byproduct (Slag). WizBang could be sold for $10 per unit, But Decolia processes it further at a cost of $8 per unit, and sells it for $20 per unit. PowWow sells for $15 per unit, and it is sold at splitoff. Last period, joint costs were $70,000, resulting in 10,000 units of WizBang, 5,000 units of PowWow, and enough slag to bring in $1,000.

Decolia allocates joint costs using sales value at splitoff as a cost allocation base and accounts for the byproduct at the time of sale.

Determine the joint costs allocated to each product, the profitability of each main product after allocating joint costs, and the overall profitability of the company.