Joint Cost AllocationNet Realizable Value Method

Nature's Garden Inc. produces wood chips, wood pulp, and mulch. These products are produced through harvesting trees and sending the logs through a wood chipper machine. One batch of logs produces 20,304 cubic yards of wood chips, 14,100 cubic yards of mulch, and 9,024 cubic yards of wood pulp. The joint production process costs a total of $32,000 per batch. After the split-off point, wood chips are immediately sold for $25 per cubic yard while wood pulp and mulch are processed further. The market value of the wood pulp and mulch at the split-off point is estimated to be $22 and $24 per cubic yard, respectively. The additional production process of the wood pulp costs $5 per cubic yard, after which it is sold for $30 per cubic yard. The additional production process of the mulch costs $4 per cubic yard, after which it is sold for $32 per cubic yard.

Allocate the joint costs of production to each product using the net realizable value method.

Joint Product	Allocation
Wood chips	$
Wood pulp
Mulch
Totals	$

Support department cost allocationcomparison

Becker Tabletops has two support departments ( Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows:

Support Department		Cost Driver
Janitorial Department		Square footage to be serviced
Cafeteria Department		Number of employees

	Janitorial Department	Cafeteria Department	Cutting Department	Assembly Department
Department costs	$310,000	$169,000	$1,504,000	$680,000
Square feet	50	5,000	1,000	4,000
Number of employees	10	3	30	10

Allocated the support department costs to the production departments using the direct method below.

	Cutting Department		Assembly Department
Janitorial Department cost allocation	$62,000		$248,000
Cafeteria Department cost allocation	$126,750		$42,250

Allocated the support department costs to the production departments using the reciprocal services method below.

	Cutting Department		Assembly Department
Janitorial Department cost allocation	$38,200		$152,800
Cafeteria Department cost allocation	$216,000		$72,000

Allocated the support department costs to the production departments and Cafeteria Department using the sequential method below.

	Cafeteria Department		Cutting Department		Assembly Department
Janitorial Department cost allocation	$155,000		$31,000		$124,000
Cafeteria Department cost allocation			$243,000		$81,000

Compare the total support department costs allocated to each production department under each cost allocation method.

a. Which production department is allocated the most support department costs under the direct method?

		Cost
		$

b. Which production department is allocated the most support department costs under the sequential method?

		Cost
		$

c. Which production department is allocated the most support department costs under the reciprocal services method?

		Cost
		$

Support Department Cost AllocationDirect Method

Christmas Timber, Inc., produces Christmas trees. The trees are produced through a cutting and pruning process. Machine maintenance and janitorial labors are performed throughout the production process by nonproduction employees. Maintenance and janitorial costs are allocated based on machine hours used and the number of trees in each department, respectively. The company estimates that the cutting and pruning areas typically have about 18 and 72 trees, respectively, in them at 1 time. The company also estimates that the cutting process requires about 9 times as many machine hours as the pruning process. The total costs of each department are as follows:

Maintenance Department	$8,000
Janitorial Department	5,000
Cutting Department	56,000
Pruning Department	12,000

Using the direct method of support department cost allocation, determine the total cost of each production department after allocating all support costs to the production departments.

	Cutting Department		Pruning Department
Production departments total costs	$		$