Question

Chapter 11: Applying Excel: Exercise (Part 2 of 2) 2. In industries that process joint products, the costs of the raw materials inputs and the sales values of intermediate and final products are often volatile. Change the data area of your worksheet to match the following: 1 Chapter 11: Applying Excel 3 4 $ $ 221,000 40,000 7 9 $ $ $ 118,000 179,000 75,000 Data Exhibit 11-7 Santa Maria Wool Cooperative Cost of wool Cost of separation process Sales value of intermediate products at split-off point: Undyed coarse wool Undyed fine wool Undyed superfine wool Costs of further processing (dyeing) intermediate products: Undyed coarse wool Undyed fine wool Undyed superfine wool Sales value of end products: Dyed coarse wool Dyed fine wool Dyed superfine wool 11 12 $ $ $ 50,000 60,000 10,000 14 15 16 $ $ $ 161,000 211,000 90,000 18 If your formulas are correct, you should get the correct answers to the following questions. a. What is the overall profit if all intermediate products are processed into final products? Overall profit from processing all intermediate products Is 81,000

Answer 1

a.Overall Profit if all intermediate products are processed into final products

= Sale value of end products – Joint cost – Cost of further processing

= 161,000+211,000+90,000 – 221,000-40,000 – 50,000 – 60,000 – 10,000

= $81,000

b.Advantage/(Disadvantage) from further processing = Sale Value after processing – Sale value at split off point – cost of further processing

Coarse Wool = Financial disadvantage of 161,000-118,000-50,000 = $7,000

Fine Wool = Financial disadvantage of 211,000 – 179,000 – 60,000 = $28,000

Superfine Wool = Financial Advantage of 90,000-75,000-10,000 = $5,000

c-1. Coarse Wool = Sell as is

Fine Wool = Sell as is

Superfine Wool = Process further

c-2. Overall Profit = 118,000+179,000+90,000 -10,000 – 221,000-40,000

= $116,000