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10 Required information Problem 17-31 Joint Products; Sell or Process Further (LO 17-4, 17-5) (The following information applies to the questions displayed below.) Part 3 of 3 Winchester Chemicals uses a joint process to produce VX-4, a chemical used in the manufacture of paints and varnishes; HD-10, a chemical used in household cleaning products; and FT-5, a by-product that is sold to fertilizer manufacturers. Joint production costs are allocated to the main products on the basis of net realizable value. The by-product is inventoried at its net realizable value, and this value is used to reduce the joint production cost before allocation to the main products. 10 points During the month of November, Winchester incurred joint production costs of $4,383,000. Data regarding Winchester's November operations are as follows: Vx-4 HD-10 FT-5 November production in gallons 700,000 370,000 95,000 $ 2.80* 7.00 Sales value per gallon at split-off None Separable processing cost Final sales value per gallon Finished-goods inventory in gallons on November 30 $1,740,000 $2,240,000 None 15.25 10.00 None (all produced during November) 10,000 31,000 2,500 *Disposal costs of $0.20 per gallon will be incurred in order to sell the by-product Problem 17-31 Part 3 3. Winchester Chemicals has an opportunity to sell HD-10 for its sales value at the split-off point. a. Calculate the incremental profit or loss from further processing HD-10. b. Determine if management should sell HD-10 at the split-off point or continue to process it further. X Answer is not complete. Complete this question by entering your answers in the tabs below. Req 3A Req 3B Calculate the incremental profit or loss from further processing HD-10. (Round the calculation of "Additional processing cost" to 2 decimal places. Round "Per Unit" answer to 2 decimal places.) Total Per Unit Incremental profit O$ 0.20 X

Answer 1

BY PRODUCT SALES VALUE LESS : COST INCURRED IN SELLING PRODUCT NET REALISATION FROM BY PRODUCT 95000*2.8 2,66,000 19,000 95000 0.2 2,47,000 JOINT COST LESS: NET REALISATION FROM BY PRODUCT JOINT COST TO BE ALLOCATED TO MAIN PRODUCTS GIVEN 43,83,000 2,47,000 41,36,000 PARTICULARS QUANTITY PRODUCED LESS: CLOSING STOCK QUANTITY SOLD VX-4 HD-10 7,00,000 3,70,000 10,000 31,000 6,90,000 3,39,000 SALES VALUE AT SPLIT OFFF PER UNIT SALES VALUE AT SPLIT OFFF JOINT COST ALLOCATED IN RATIO OF QUANTITY PRODUCED ( NOTE 1) PROFIT/(LOSS) IF SOLD AT SPLIT OFF - (A) SALES VALUE AFTER FURTHER PROCESSING PER UNIT SALES VALUE AFTER FURTHER PROCESSING LESS : FURTHER PROCESSING COST NRV AFTER FURTHER PROCESSING JOINT COST ALLOCATED IN RATIO OF NRV AFTER FURTHER PROCESSING PROFIT/(LOSS) IF SOLD AFTER FURTHER PROCESSING (B) INCREAMENTAL PROFIT/(LOSS) AFTER FURTHER PROCESSING (B-A) INCREAMENTAL PROFIT/(LOSS) AFTER FURTHER PROCESSING PER UNIT 23,73,000 27,05,794 14,30,206 -27,05,794 9,42,794 10 15 69,00,000 33,90,000 17,40,000 22,40,000 51,60,000 11,50,000 33,82,212 7,53,788 3,96,212 -5,46,582 17,77,788 44.83,582 -2 ADVICE: ORGANISATION SHOULD NOT GO FOR FURTHER PROCESSING OF HD-10 NOTE 1 IN THE ABSENCE OF SELLING PRICE AT SPLIT OFF POINT OF PRODUCT VX-4 OR ANY OTHER SPECIFIC INSTRUCTION TO ALLOCARE JOINT COST AT SPLIT OFF POINTJOINT COST IS ALLOCATED TO VX-4 & HD-10 ON THE BASIS OF QUANTITY PRODUCED