Question

Davenport Company buys Alpha-11 for $6 a gallon. At the end of distilling in Department A, Alpha-11 splits off into three products: Beta-1, Beta-2, and Beta-3. Davenport sells Beta-1 at the split-off point, with no further processing; it processes Beta-2 and Beta-3 further before they can be sold. Beta-2 is fused in Department B, and Beta-3 is solidified in Department C. Following is a summary of costs and other related data for the year ended November 30.

Department	(1) Distilling			(2) Fusing			(3) Solidifying
Cost of Alpha-11	$	718,000			0			0
Direct labor		173,000		$	342,000		$	496,000
Manufacturing overhead		140,000			167,000			402,000

Products	Beta-1			Beta-2			Beta-3
Gallons sold		184,000			368,000			552,000
Gallons on hand at year-end		124,000			0			188,000
Sales	$	644,000		$	2,208,000		$	3,312,000

Davenport had no beginning inventories on hand at December 1 and no Alpha-11 on hand at the end of the year on November 30. All gallons on hand on November 30 were complete as to processing. Davenport uses the net realizable value method to allocate joint costs.

1. The cost of Beta-2 sold for the year ended November 30. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

2. The value of the ending inventory for Beta-1. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Answer 1

1) Calculation of Totsl cost at different dipartment

Department	Distilling($)	Fusing($)	Solidifying($)
Cost of Alpha 11	718,000	0	0
Direct labor	173,000	342,000	496,000
Manufacturing overhead	140,000	167,000	402,000
Total Cost at different department	1,031,000	509,000	898,000

2) Calculation of total gallons produced during the year of different product and combined

Product	Beta-1	Beta-2	Beta-3
sales (gallons)	184000	368000	552000
Add: Closing Stock(gallons)	124000	0	188000
	308000	368000	740000
Less:-Opening stock(gallons)	0	0	0
Total gallons produced during the year	308000	368000	740000
Total sales During the year	$            644,000	$        2,208,000	$        3,312,000

combined Total gallons Produced = (308000+368000+740000)

=1416000 gallons

Total sales during the year = (644,000+2,208,000+3,312,000) = $6,164,000

Total gallons of Alpha 11 used = combined total gallons of beta-1,2 and 3 produded = 1416000 gallons

Cost of "Alpha-11" =Total gallons of Alpha 11 used x $ 6 per gallon

= 1416000 gallon x $ 6

= $ 8,496,000

Joint Cost per unit upto fusing department = (cost of alpa 11 + cost incurred in fusing and distilling department)/total no.(gallon) of units of 3 products

= ($8,496,000 + $ 1,540,000)/1416000)

= 7.09 per gallon

1) Cost of Beta-2 sold during the year = (total gallons of beta sold) x (joint cost per unit upto fusing department)

= (368000 gallons x 7.09 per gallon)

=$ 2,609,120

2) Value of ending inventory of beta-1 = (joint cost upto distilling department/total gallon of beta-1,2 &3 produced during the year) X ( gallons of beta1 on hand at year end)

= [($ 8,496,000+ $ 1,031,000)/ 1416000 gallons] x 124000 gallons

=$ 834,285

Note- Joint cost upto distilling department = (Cost of alpha 11+ cost incurred at distilling department)