Altemative methods ofjoint cost allocation, ending inventories. The Dari Company operates a simple chemical process to reduce
Question:
Altemative methods ofjoint cost allocation, ending inventories. The Dari Company operates a simple chemical process to reduce a single material into three separate items, here referred to as X, Y, and Z. All diree end products are separated simultaneously at a single splitoffpoint.
Products X and Y are ready for sale immediately upon splitoff without further process¬
ing or any other additional costs. Product Z, however, is processed further before being sold.
There is no available market price for Z at the splitoff point.
The selling prices quoted below have not changed for three years, and no changes are foreseen for the coming year. During 2007, the selling prices of the items and the total amounts sold were as follows:
X: 120 tonnes sold for $1,800 per tonne Y: 340 tonnes sold for $1,200 per tonne Z: 475 tonnes sold for $840 per tonne The total joint manufacturing costs for the year were $480,000. An additional $240,000 was spent to finish product Z.
There were no beginning inventories ofX, Y, or Z. At the end ofthe year, the following inventories of completed units were on hand: X, 180 tonnes; Y, 60 tonnes; Z, 25 tonnes.
There was no beginning or ending work in process.
Required 1. What will be the cost of inventories of X, Y, and Z for balance sheet purposes and what will be the cost of goods sold for income statement purposes as of December 31, 2007, using
(a) the estimated NRV method of joint cost allocation and $J)-the-eoiIstant gross rrtargifrpercentage NRV method ofjoint cost allocation?
/ \ 2. Compare the gross margin percentages for X, Y, and Z using the two methods given in j requirement 1.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780131971905
4th Canadian Edition
Authors: Charles T. Horngren, George Foster, Srikant M. Datar, Howard D. Teall