Estimated net realizable value method, byproducts. (CMA, adapted) The Princess Corporation grows, processes, packages, and sells three
Question:
Estimated net realizable value method, byproducts. (CMA, adapted) The Princess Corporation grows, processes, packages, and sells three joint apple products:
(a) sliced apples that are used in frozen pies,
(b) applesauce, and
(c) apple juice. The skin of the apple, processed as animal feed, is treated as a byproduct. Princess uses the estimated NRV method to allocate costs of the joint process to its joint products. The byproduct is inventoried at its selling price when produced; the net realizable value of the byproduct is used to reduce the joint production costs before the splitoff point. Details of Princess’s production process are presented here:
The apples are washed and the skin is removed in the Cutting Department. The apples are then cored and trimmed for slicing. The three joint products and the byproduct are recog¬
nizable after processing in the Cutting Department. Each product is then transferred to a separate department for final processing.
The trimmed apples are forwarded to the $licing Department, where they are sliced and frozen. Any juice generated during the slicing operation is frozen with the slices.
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.
The core and any surplus apple pieces generated from the Cutting Department are pul¬
verized 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.
The outside skin is chopped into animal feed and packaged in the Feed Department. It can be kept in cold storage until needed.
A total of 270,000 kilograms of apples entered the Cutting Department during November. The following schedule shows the costs incurred in each department, the proportion by weight transferred to the four final processing departments, and the selling price of each end product.
Processing Data and Costs, November 2007 Departments Costs Incurred Proportion of Product by Weight Transferred to Department Selling Price per Kilogram ofFinal Product Cutting $ 72,000 Slicing 13,536 33% $0.96 Crushing 10,260 30 0.66 Juicing 3,600 27 0.48 Feed 840 10 0.12 Total $100,236 100% $2.22 Required 1. The Princess Corporation uses the estimated NRV method to determine inventory cost of its joint products; byproducts are reported on the balance sheet at their selling price when produced. For the month of November 2007, calculate the following:
a. The output for apple slices, applesauce, apple juice, and animal feed, in kilograms.
b. The estimated NRV at the splitoff point for each of the three joint products.
c. The amount of the cost of the Cutting Department assigned to each of the three joint products and the amount assigned to the byproduct in accordance with corporate policy.
d. The gross margins in dollars for each of the three joint products.
2. Comment on the significance to management of the gross margin dollar information by joint product for planning and control purposes, as opposed to inventory costing purposes.
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