Question

Fletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into production in Department X, and at the end of processing in this department, three products appear Product A is sold at the split-off point with no further processing. Products B and C require further processing before they are sold, Product B is processed in Department Y, and product C is processed in Department Z. The company uses the estimated net realizable value method of allocating joint production costs. Following is a summary of costs and other data for the quarter ended June 30. No inventories were on hand at the beginning of the quarter. No raw material was on hand at June 30. All units on hand at the end of the quarter were fully complete as to processing. А в Products Pounds sold Pounds on hand at June 30 Sales revenues 18,000 55,800 67, 50,000 $42,300 $264,000 $351,750 Departments Raw material cost Direct labor cost Manufacturing overhead $162,000 $ 75,000 95,eee 29,000 31,100 $ 281, eee 101,500 Required: a. Determine the following amounts for each product: [t) estimated net realizable value used for allocating joint costs. (2) joint costs allocated to each of the three products, (3) cost of goods sold, and (4) finished goods inventory costs, June 30 b. Assume that the entire output of product Acould be processed further at an additional cost of $5.70 per pound and then sold for $12.40 per pound. Compute the incremental income from further processing A c. Considering the results of part b. should the company process product A further?

Answer 1

Product Solution, Total Cost Joint Cost Product B $155000X1:14) 62,700 Чs боо Total Cost (Department x) ( 111.000 x 1.14) 1,26,540 281,000 162,000 + 75000 Row Material Direct labour Manufacturing overhead Direct Icebour Manufacturing oveothead 31,100 188,800 101,500 509,040 + 29000 te 2,6 6,000 509,040 111,000 Cost Peor Pound 188,800 68.000 -$2.78 $4.58 Total Pound Processed in department a I Ending Inventory Cost of good fold S Joint Cost 8. Product A Estimated Net Realizable value 1 Sales - total 55000 67000 44000 111.000 cost S000 18.000 50,000 68.00D Vroduct A *79.520 20520 55.000 Product B Product c $ 21.780 $ 0,11,100 1$ 42,890 62,700 1,52,900 126,540 308,860 201.520 Totallie A+b+c) = 68,000 +55000 +1.41.000) Hound (b = 2,34,000 Pound. 6 Joint Cost fear Pound = (a+b) Total Cost 266,000 - 234000 Total round. $ 1014 Peat Panda Incremental Income for further processing A .= $18000 x (1267-54) - 423003 = $ (131,400 – 42.300) = $ 89.100 0 Yes, company should Process Product 'A' further.