Reference no: EM132755592

Question - Answer with solution

Case 1 - Atlas Foods produces three supplemental food products simultaneously through a refining process costing P93,000. The joint products, Alfa and Betters, have a final selling price of P4 per pound and P10 per pound, respectively, after additional processing costs of P2 per pound of each product are incurred after the split-off point. Morefeed, a by-product, is sold at the split-off point for P3 per pound. Additional information are as follows:

Alfa - 10,000 pounds of Alfa, a popular but relatively rare grain supplement of having a caloric value of 4,400 calories/pound.

Betters - 5,000 pounds of Betters, a flavouring material high in carbohydrates with a caloric value of 11,200 calories/pound.

Morefeed - 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories/pound.

Required -

1. Assuming Atlas Food inventories Morefeed, the by-product, the joint cost to be allocated to Alfa, using the NRV method is?

2. Assuming Atlas Food inventories Morefeed, the by-product, the joint cost to be allocated to Alfa, using physical quantity method (pounds) is?

3. Assuming Atlas Food inventories Morefeed, the by-product, the joint cost to be allocated to Betters, using caloric value per pound is?

4. Assuming Atlas Food does not adjust the joint cost for the value of Morefeed, the by-product, the joint cost to be allocated to Betters, using the NRV method is?

Case 2 - Shaffner Corporation produces three products, Alpha, Beta and Gamma. Alpha and Gamma are joint products; Beta is a by-product of Alpha No joint cost is to be allocated to the by-product. The production processes for a given year are as follows:

a. In Department 1, 110,000 pounds of material Rho (raw materials) are processed, at a total cost of P120,000. After processing, 60% of units are transferred to Department 2, and 40% of the units (now Gamma) are transferred to Department 3.

b. In Department 2, the material is further processed at a total additional cost of P38,000. Seventy percent of the units (now Alpha) are transferred to Department 4 and 30% emerge as Beta, the by-product, to be sold at P1.20 per pound. The marketing expense related to Beta is P8,100.

c. In Department 4, Alpha is processed at a total additional cost of P23,660. After processing, Alpha is ready for sale at P5 per pound.

d. In Department 3, Gamma is processed at a total additional cost of P165,000. In this department, a normal loss of units of Gamma occurs, which equals 10% of the good output of Gamma. The remaining good output is sold for P12 per pound.

Required - Using the market value at split-off point and treating the net realizable value of Beta as an addition to the sales value of Alpha, determine the amount of joint costs to be allocated between the two joint products, Alpha and Gamma.