Princess Corporation grows, processes, packages, and sells three apple products—sliced apples that are used in frozen pies, applesauce, and apple juice. The outside skin of the apple, which is removed in the Cutting Department and processed as animal feed, is treated as a by-product. Princess uses the net realizable (relative sales) value method to assign costs of the joint process to its main products. The by-product is inventoried at its market value, and the net realizable value of the by-product is used to reduce the joint production cost prior to allocation to the main products. Details of Princess' production process are presented below.

a. The apples are washed and the outside skin is removed in the Cutting Department. The apples are then cored and trimmed for slicing. The three main products and the by¬

product are recognizable after processing in the Cutting Department. Each product is then transferred to a separate department for final processing.

b. The trimmed apples are forwarded to the Slicing Department where they are sliced and frozen. Any juice generated during the slicing operation is frozen with the slices.

c. The pieces of apple trimmed from the fruit are processed into applesauce in the Crushing Department. The juice generated during this operation is used in the applesauce.

d. The core and any surplus apple generated from the Cutting Department are pulverized into a liquid in the Juicing Department. There is a loss equal to 8% of the weight of the good output produced in this department.

e. The outside skin is chopped into animal feed and packaged in the Feed Department.

A total of 270,000 pounds of apples were entered into the Cutting Department during November. The following schedule shows the costs incurred in each department, the pro¬

portion by weight transferred to the four final processing departments,,and the selling price of each end product.

Required:
1. Princess Corporation uses the net realizable value method to determine inventory values for its main products and by-products. For the month of November, 2001, calculate the:

a. Resulting output in pounds for apple slices, applesauce, apple juice, and animal feed

b. Net realizable value at the split-off point for each of the three main products

c. Amount of the cost of the Cutting Department assigned to each of the three main products and to the by-product in accordance with corporate policy

d. Gross margins in dollars for each of the three main products 2. Comment on the significance to management of the gross margin dollar information by main product for planning and control purposes, as opposed to inventory valuation.

Transcribed Image Text:

PROCESSING DATA AND COSTS NOVEMBER 2001 Department Costs Incurred Proportion of Product by Weight Selling Price/lb. Transferred to Departments of Final Product Cutting $60,000 none Slicing 11,280 33% Crushing 8,550 30 none $0.80 0.55 Juicing 3,000 27 0.40 Feed 700 10 0.10 Total $83,530 100%