Joint costs and byproducts. (W. Crum) Royston, Inc. is a large food processing company. It processes 120,000
Question:
Joint costs and byproducts. (W. Crum) Royston, Inc. is a large food processing company. It processes 120,000 pounds of peanuts in the Peanuts Department at a cost of $1 60,000 to yield 10,000 pounds of product A, 60,000 pounds of product B, and 20,000 pounds of product C.
- Product A is processed further in the Salting Department to yield 10,000 pounds of salted peanuts at a cost of $20,000 and sold for $10 per pound.
- Product B (Raw Peanuts) is sold without further processing at$2 per pound.
- Product C is considered a byproduct and is processed further in the Paste Department to yield 20,000 pounds of peanut butter at a cost of $10,000 and sold for $3 per pound.
The company wants to make a gross margin of 10% of revenues on product C and needs to allow 25% of revenues for marketing costs on product C. An overview of operations follows:
1. Compute unit costs per pound for products A, B, and C, treating C as a byproduct. Use the NRV method for allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B.
2. Compute unit costs per pound for products A, B, and C, treating all three as joint products and allocating joint costs by the NRV method.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0136126638
13th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav