Question

Rabito, Inc., is a large food-processing company. It processes 156,000 pounds of peanuts in the peanuts department at a cost of $219,200 to yield 22,000 pounds of product A, 70,000 pounds of product B, and 17,000 pounds of product C. (Click the icon to view the information.) The company wants to make a gross margin of 10% of revenues on product C and needs to allow 20% of revenues for marketing costs on product C. An overview of operations follows: Click the icon to view the overview.) Read the requirements. i More Info - X method tl Figure te amour Joint Costs $219,200 Separable Costs • Product A is processed further in the salting department at a cost of $40,000. It yields 22,000 pounds of salted peanuts, which are sold for $10 per pound. . Product B (raw peanuts) is sold without further processing at $6 per pound. - Product C is considered a byproduct and is processed further in the paste department at a cost of $12.200. It yields 17,000 pounds of peanut butter, which are sold for $6 per pound. 22.000 pounds Salcino Department Pue S4MI Sale Pannut 22.000 pounds 310/Ib Print Done l'eanuts Dupun Irumu a 136.000 h Raw Punnus Minnes $6/11 i Requirements Phire Department Processing $12,200 Peanut Butter 17,000 paunds Solb 17.000 pounds 1. Compute unit costs per pound for products A, B, and treating C as a byproduct. Use the NRV method for allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B. Compute unit costs per pound for products A, B, and treating all three as joint products and allocating joint costs by the NRV method. Split Point Print Done Print Done Enter any number in the arit file and then clink Chark Anwar

Answer 1

1. Calculation of unit costs

1	2	3	4	5	6	7	8	9	10	11	12
Product	Quantity	Selling price	Sales (2 * 3)	Separable mfg cost	Separable marketing cost (20%)	Desired gross profit (10%)	Sales at split off (4 - 5 - 6 -7)	Allocation of joint mfg cost*	Separable mfg cost	Total mfg cost (9 + 10)	Total mfg cost per unit (11 / 2)
A	22,000	10	220000	40000	0	0	180000	48000	40000	88000	4
B	70,000	6	420000	0	0	0	420000	112000	0	112000	1.6
C	17,000	6	102000	12200	20400	10200	59200	59200	12200	71400	4.2
							659200	219200

*Allocation of joint mfg cost:

For Product C = same as sales at split off as Product C is a byproduct

For Product B = [($219,200 - $59,200) / ($180,000 + $420,000)] * $420,000

= ($160,000 / $600,000) * $420,000

= $112,000

For Product A = [($219,200 - $59,200) / ($180,000 + $420,000)] * $180,000

= ($160,000 / $600,000) * $180,000

= $48,000

2. Calculation of unit costs

1	2	3	4	5	6	7	8	9	10	11
Product	Quantity	Selling price	Sales (2 * 3)	Separable mfg cost	Separable marketing cost (20%)	Sales at split off (4 - 5 - 6 )	Allocation of joint mfg cost*	Separable mfg cost	Total mfg cost (8 + 9)	Total mfg cost per unit (10 / 2)
A	22,000	10	220000	40000	0	180000	58942	40000	98942	4.50
B	70,000	6	420000	0	0	420000	137532	0	137532	1.96
C	17,000	6	102000	12200	20400	69400	22726	12200	34926	2.05
						669400	219200

*Allocation of joint mfg cost:

Product A = ($219,200 / $669,400) * $180,000 = $58,942

Product B = ($219,200 / $669,400) * $420,000 = $137,532

Product C = ($219,200 / $669,400) * $69,400 = $22,726