Problem 16-27 Joint-Cost Allocation, Sales Value, Physical Measure, and NRV Methods

Problem 16-27 Joint-cost allocation, sales value, physical measure, and NRV meth
1. Calculate Fancy's gross margin percentage for Special B and Special S when joint costs are allo
allocated using the following:
a. Sales value at splitoff method

Allocation of joint costs Beef Ramen Shrimp Ramen
Sales value of total production at splitoff point 100,000 560,000
Weighting 15% 85%
Joint costs allocated 60,000 340,000
Product-Line Income Statement Special B Special S

Revenues 425,000 1,122,000
Less: Joint costs allocated 60,000 340,000
Separable costs 100,000 238,000
Gross margin 265,000 544,000
Gross margin percentage 62.35% 48.48%
b. Physical-measure method
Physical measuer of total production (tons) 20,000 28,000
Weighting 42% 58%

Revenues 425,000 1,122,000
Gross margin 157,000 652,000
c. Net realizable value method

Final sales value of total production during accounting period 425,000 1,122,000
Less: Separable costs 100,000 238,000
Net realizable value at splitoff point 325,000 884,000
Weighting 27% 73%

Revenues 425,000 1,122,000
Gross margin 217,000 592,000
2. Compute how Dashel arrive at the loss of $2,435 from marketing the stock as joint using sales v
at splitoff method, and what about her analysis? Should Fancy sell the stock?
Sales value at splitoff method

Sales value of total production at splitoff point 100,000 560,000
Weighting 14.62% 81.87%

Revenues 425,000 1,122,000
Gross margin 266,520 556,515
Less: Marketing costs
Operating income
The analysis presented above is wrong and misleading, even more so using other methods of allocati
joint costs. This is because the $400,000 joint costs are allocated between Special B, Special S, and t
Furthermore, joint costs are always irrelevant inprocess-further decisions. Only the relevant ones are t
incremental costs and the revenues past the splitoff point. Therefore, Fancy Foods SHOULD sell the s
that the incerental revenues from selling the stock are 24,000 and the incremental costs are 12,400. T
to an increase in the operating income by 11,600.
asure, and NRV methods
when joint costs are allocated using the following:
Total
660,000
400,000
Total
1,547,000
400,000
338,000
809,000
52.29%
Total
48,000
400,000
Total
1,547,000
400,000
338,000
809,000
52.29%
Total
1,547,000
338,000
1,209,000
400,000
Total
1,547,000
400,000
338,000
809,000
52.29%
ck as joint using sales value
Stock Total
24,000 684,000
3.51% 100%
14,035 400,000
Stock Total
24,000 1,571,000
14,035 385,965
- 338,000
9,965 833,000
12,400 12,400
(2,435) 820,600
g other methods of allocating the

Special B, Special S, and the stock.
nly the relevant ones are the
Foods SHOULD sell the stock given
mental costs are 12,400. This will result
Problem 16-31 Joint costs and decision making
1. Compute unit costs per pound for products A, B, and C, treating C as a byproduct. Use the NRV
joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B.
Revenues from C 96,000

Less: Gross margin (10% of revenues) 9,600
Marketing costs (20% of revenues) 19,200
Paste department separable costs 12,000
Net realizable value (less Gross margin) of C 55,200 A
B
Joint costs 180,000
Less: Byproduct contribution 55,200
Net joint costs to be allocated 124,800
Allocation of joint costs A B Total

Final sales value 144,000 195,000 339,000
Less: Separable processing costs 27,000 - 27,000
Net realizable value at splitoff 117,000 195,000 312,000
Weighting 37.5% 62.5% 100%
Joint costs allocated 46,800 78,000 124,800
Product-Line Income Statement A B Total

Joint costs allocation 46,800 78,000 124,800
Add: Separable processing costs 27,000 - 27,000
Total costs 73,800 78,000 151,800
Divdided by number of units 12,000 65,000 77,000
Unit cost 6.15 1.20
Unit cost for C 4.20
2. Compute unit costs per pound for products A, B, and C, treating all three as joint products and a
by the NRV method.
Quantity Unit Sales Price

A 12,000 12.00
B 65,000 3.00
C 16,000 6.00
Allocation of joint costs A B C

Final sales value 144,000 195,000 96,000
Less: Separable processing costs 27,000 - 31,200
Net realizable value at splitoff 117,000 195,000 64,800
Weighting 31.05% 51.75% 17.20%
Joint costs allocated 55,892 93,153 30,955
Product-Line Income Statement A B C

Joint costs allocation 55,892 93,153 30,955
Add: Separable processing costs 27,000 - 12,000
Total costs 82,892 93,153 42,955
Divdided by number of units 12,000 65,000 16,000
Unit cost 6.91 1.43 2.68
duct. Use the NRV method for allocating
products A and B.
Quantity Unit Sales Price

12,000 12.00
65,000 3.00
oint products and allocating joint costs
Total
435,000
58,200
376,800
100%
180,000
Total
180,000
39,000
219,000
93,000

Problem 16-27 Joint-Cost Allocation, Sales Value, Physical Measure, and NRV Methods

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How are joint costs allocated using different methods and how does it affect gross margin percentages?

How are joint costs allocated using different methods and how does it affect gross margin percentages?

How did Dashel incorrectly analyze whether Fancy Foods should sell the stock?

How did Dashel incorrectly analyze whether Fancy Foods should sell the stock?

Problem 16-27 Joint-cost allocation, sales value, physical measure, and NRV meth

a. Sales value at splitoff method

Product-Line Income Statement Special B Special S

Product-Line Income Statement Special B Special S

c. Net realizable value method

Product-Line Income Statement Special B Special S

Sales value at splitoff method

Product-Line Income Statement Special B Special S

ck as joint using sales value

g other methods of allocating the

Revenues from C 96,000

Allocation of joint costs A B Total

Product-Line Income Statement A B Total

Unit cost for C 4.20

Quantity Unit Sales Price

Allocation of joint costs A B C

Product-Line Income Statement A B C

Quantity Unit Sales Price

oint products and allocating joint costs

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