i Data Table Joint Costs Joint costs (costs of noodles, spices, and other inputs and processing to splitoff point) $380,000 Beef Shrimp Ramen Ramen Beginning inventory (tons) Production (tons) Sales (tons) Selling price per torn 9,000 11,000 9,000 11,000 15 $ 35 i Data Table Joint Costs Special B Special S Joint costs (costs of noodles, spices, and other inputs and processing to splitoff point) 380,000 Separable cos ts of processing 9,000 tons of $ 36,000 Beef Ramen into 12,000 tons of Special B Separable co sts of processing 11,000 tons of $ 136,000 Shrimp Ramen into 17,000 tons of Special S Beef Shrimp Ramen Ramen Special B Special S Beginning inventory (tons) Production (tons) Transfer for further processing (tons) Sales (tons) Selling price per ton 9,000 11,000 2,000 17,000 9,000 11,000 2,000 17,000 15 S 35 S 20 S 47 Requirements 1 Calculate Tasty's gross-margin percentage for Special B and Special S when joint costs are allocated using the following a. Sales value at splitoff method b. Physical-measure method c. Net realizable value method 1. Recently, Tasty discovered that the stock it is dumping can be sold to cattle ranchers at $5 per ton. In a typical month with the production levels shown, 3,000 tons of stock are produced and can be sold by incurring marketing costs of $11,100. Sabrina Donahue, a management accountant, points out that treating the stock as a joint product and using the sales value at splitoff method, the stock product would lose about $6,754 each month, so it should not be sold. How did Donahue arrive at that final number, and what do you think of her analysis? Should Tasty sell the stock? 2. Tasty Foods produces two types of microwavable products: beef-flavored ramen Due to the popularity of its microwavable products, Tasty decides to add a new and shrimp-flavored ramen. The two products share common inputs such as noodle and spices. The production of ramen results in a waste product referred to a special ingredient to dilute the original ramen and are to be sold under the as stock, which Tasty dumps at negligible costs in a local drainage area. In June names Special B and Special S, respectively. Following are the monthly data for 2017, the following data were reported for the production and sales of beef-flavored and shrimp-flavored ramen: ine of products that targets dieters. These new products are produced by adding all the products: (Click the icon to view the monthly data for all products.) Read the requirements EE (Click the icon to view the data.) Requirement 1. Calculate Tasty's gross-margin percentage for Special B and Special S using the different methods for allocating the joint costs. a. Allocate the joint costs using the sales value at splitoff method. Begin by entering the amounts in the table and allocate the joint costs. (Enter the weighting to two decimal places.) Special S shrimp ramen Sales value at splitoff Special B/ Total beef ramern Sales value of total production at splitoff Weighting Joint costs allocated Compute the gross margin percentages using the sales value at splitoff method to allocate the joint costs. (Round the percentages to the nearest whole percent. Use parentheses or a minus sign when entering applicable negative gross margin amounts and percentages.) Total Special B Special S Revenues Joint costs Separable costs Gross margin Gross margin percentage b. Allocate the joint costs using the physical-measure method. Enter the amounts in the table and allocate the joint costs. (Enter the weighting to two decimal places.) Physical-measure method. Special S/ shrimp ramen Special B/ Total beef ramen Physical measure of total production (tons) Weighting Joint costs allocated Compute the gross margin percentages using the physical-measures method to allocate the joint costs. (Round the percentages to the nearest whole percent. Use parentheses or a minus sign when entering applicable negative gross margin amounts and percentages.) Total Special B Special S Revenues Joint costs Separable costs Gross margin Gross margin percentage c. Allocate the joint costs using the net realizable value method. Enter the amounts in the table and allocate the joint costs. (Enter the weighting to two decimal places.) Net realizable value (NRV) method: Special B Special S Total Net realizable value of total production at splitoff Weighting Joint costs allocated Compute the gross margin percentages using the NRV method to allocate the joint costs. (Round the percentages to the nearest whole percent. Use parentheses or a minus sign when entering applicable negative gross margin amounts and percentages.) Total Special B Special S Revenues Joint costs Separable costs Gross margin Gross margin percentage Requirement 2. Recently, Tasty discovered that the stock it is dumping can be sold to cattle ranchers at $5 per ton. In a typical month with the production levels shown above, 3,000 tons of stock are produced and can be sold by incurring marketing costs of $11,100. Sabrina Donahue, a management accountant, points out that treating the stock as a joint product and using the sales value at splitoff method, the stock product would lose about $6,754 each month, so it should not be sold How did Donahue arrive at that final number? A. $15,000 (10,654) (11,100) (6,754) $15,000 (21,754) $(6,754) Revenues Revenues Less: Joint costs Operating loss Less: Joint costs Marketing costs Operating loss $15,000 (10,317) (337) (11,100) $(6,754) $ 535,000 0.00812 4,346 (11,100) $(6,754) Revenues Revenues Less: Joint production costs Joint marketing costs Separable costs Weighting (stock product) x Less: Marketing costs Operating loss Operating loss What do you think of her analysis? Should Tasty sell the stock? 0 A. Allocating joint costs to products according to the sales value at splitoff is a valid method of cost allocation. Based on Donahue's analysis using the sales value O B. The analysis is flawed. Marketing costs are irrelevant to the decision. Only incremental costs and revenues prior to the splitoff point are relevant. In this case at splitoff method, selling the stock would result in a reduction of Tasty's operating income by $6,754; therefore, Tasty should not sell the stock. then, the revenues, $15,000, and the joint costs, $10,654, from selling the stock result in an increase in Tasty's operating income of $4,346. Therefore, Tasty should sell the stock. C. The analysis is flawed. Joint costs are always irrelevant in a process-further decision. Only incremental costs and revenues past the splitoff point are relevant. In this case, then, the revenues, $15,000, and the incremental costs, $11,100, from selling the stock result in an increase in Tasty's operating income of $3,900. Therefore, Tasty should sell the stock. 0 D. As exemplified in requirement 1, the different cost allocation methods results in different margins reported by each of the products over the same accounting period. Because of these differences, Donahue must examine the effect on operating income from selling the stock product under multiple cost allocation methods prior to determining whether or not the company should sell the product