Reference no: EM132973241

Problem - Hershey Company purchases cocoa beans and processes them into cocoa butter, cocoa powder, and cocoa shells. The standard yield from each 100-pound sack of unprocessed cocoa beans is 20 pounds of butter, 45 pounds of powder, and 35 pounds of shells. The butter must be molded and packed before it can be sold. A further processing cost of PHP 1.50 per pound was incurred for Cocoa Butter before it can be sold for PHP 12.50 per pound. The powder can be sold for PHP 9.00 per pound at the split-off point. The shells, which are considered a by-product, sell for PHP 0.40 per pound. The company estimates net realizable values at split-off if no market price is available at that point. The cost of the cocoa beans is PHP 1,500 per pound. It costs PHP 3,700 in labor and overhead to process each 100 pounds of beans up to split-off point.

Requirement -

1) Assuming that the shells are recorded as other income at the time they are sold, compute the allocated joint costs of butter produced from 100 pounds of beans using the net realizable value method.

2) Assuming that the shells are recorded as other income at the time they are sold, compute the allocated joint cost of the butter and powder produced from each 100 pounds of cocoa beans, using the physical (pounds) method.

3) If the net realizable value of the shells is entered as a credit to the primary  manufacturing costs at the time the shells are recovered and if the net realizable value method is used for joint cost allocation, what would be the allocation of the joint cost to the main products.