(Joint cost allocation; scrap) Kelly’s Linens produces cloth products for ho¬ tels. The company buys fabric in 60-inch-wide bolts. In the first process, the fabric is set up, cut, and separated into pieces. Setup can be for either robes and bath towels or hand towels and washcloths.

During July, the company set up and cut 6,000 robes and 12,000 bath towels. Because of the irregular pattern of the robes, the process produces scrap that is sold to various prisons and hospitals for rags at $0.65 per pound. July production and cost data for Kelly’s Linens are as follows:

The selling price of the scrap is treated as a reduction of joint cost.

a. Determine the joint cost to be allocated to the joint products for July.

b. How much joint cost is allocated to the robes in July? To the bath tow¬ els? Prepare the journal entry necessary at the point of split-off.
C. What amount of cost for robes is transferred to Finished Goods Inven¬ tory for July? What amount of cost for towels is transferred to Finished Goods Inventory for July? LO1.

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Fabric used, 25,000 feet at $1.50 per foot $37,500 Labor, joint process $12,000 Overhead, joint process $11,000 Pounds of scrap produced 3,600 Kelly's Linens assigns the joint processing cost to the robes and towels based on approximated net realizable value at split-off. Other data gathered include these: Per Robes Per Bath Towel Costs after split-off are $40.00 16.80 $22.00 4.60 Final selling prices