Reference no: EM133090021

Question - The Wood Spirits Company produces two products-methanol ?(wood alcohol) and turpentine-by a joint process. Joint costs amount to $116,000 per batch of output. Each batch totals 13,000 gallons: 25% methanol and? 75% turpentine. Both products are processed further without gain or loss in volume. Separable processing costs are? methanol, $2 per? gallon, and? turpentine, $1 per gallon. Methanol sells for $20 per gallon. Turpentine sells for $15 per gallon.

Required -

1. How much of the joint costs per batch will be allocated to methanol and to? turpentine, assuming that joint costs are allocated based on the number of gallons at split off? point?

2. If joint costs are allocated on an NRV? basis, how much of the joint costs will be allocated to methanol and to? turpentine?

3. Prepare? product-line income statements per batch for requirement 1 and 2. Assume no beginning or ending inventories.

4. The company has discovered an additional process by which methanol? (wood alcohol) can be made into a? pleasant-tasting alcoholic beverage. The selling price of this beverage would be $45 a gallon. Additional processing would increase separable costs by $6 per gallon? (in addition to the $2 per gallon separable cost required to yield? methanol). The company would have to pay excise taxes of? 20% on the selling price of the beverage. Assuming no other changes in? cost, what is the joint cost applicable to the wood alcohol? (using the NRV? method)? Should the company produce requirements for split-off alcoholic? beverages? Show your computations.