Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Alternative joint-cost-allocation methods, further-process decision. The Tempura Spirits Company produces two products-methanol (wood alcohol) and turpentineby a joint process. Joint costs amount to $124.000 per
Alternative joint-cost-allocation methods, further-process decision. The Tempura Spirits Company produces two products-methanol (wood alcohol) and turpentineby a joint process. Joint costs amount to $124.000 per batch of output. Each batch totals 9,500 gallons: 25% methanol and 75% turpentine. Both products are processed further without gain or loss in volume. Separable processing costs are methanol, $4 per gallon, and turpentine, $2 per gallon. Methanol sells for $22 per gallon. Turpentine sells for $16 per gallon. Required: 1. How much of the joint costs per batch will be allocated to methanol and to turpentine, assuming that joint costs are allocated based on the number of gallons at split-off point? 2. If joint costs are allocated on an NRV basis, how much of the joint costs will be allocated to methanol and to turpentine? 3. the company has discovered an additional process by which the methanol (wood alcohol) can be made into a pleasant-tasting alcoholic beverage. The selling price of this beverage would be $55 a gallon. Additional processing would increase separable costs $12 per gallon (in addition to the $4 per gallon separable cost required to yield methanol). The company would have to pay excise taxes of 20% on the selling price of the beverage. Assuming no other changes in cost, what is the joint cost applicable to the wood alcohol (using the NRV method)? Should the company produce the alcoholic beverage? Show your computations
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started