Alternative methods ofjoint cost allocation, product-mix decisions. The Sunshine Oil Company buys crude vegetable oil. Refining this
Question:
Alternative methods ofjoint cost allocation, product-mix decisions. The Sunshine Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product C is fully processed at the splitoff point. Products A, B, and D can be individually further refined into Super A, Super B, and Super D. In the most recent month (December), the output at the splitoff point was Product A 300,000 litres Product B 100,000 litres Product C 50,000 litres Product D 50,000 litres The joint cost of purchasing the crude vegetable oil and processing it was $120,000.
Sunshine had no beginning or ending inventories. Sales of product C in December were $60,000. Total output of products A, B, and D was further refined and then sold. Data related to December are as follows:
Separable Processing Costs to Make Super Products Sales Super A $240,000 $360,000 Super B 96,000 120,000 Super D 108,000 144,000 Sunshine had the option ofselling products A, B, and D at the splitoff point. This alter¬
native would have yielded the following sales for the December production:
Product A $60,000 Product B 36,000 Product D 84,000 Required 1. What is the gross margin percentage for each product sold in December, using the following methods for allocating the $120,000 joint costs:
(a) sales value at splitoff,
(b) physical measure, and
(c) estimated NRV?
2. Could Sunshine have increased its December operating income by making different decisions about the further refining of products A, B, or D? Show the effect on operating income of any changes you recommend.
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