What are the ending inventory values of each product on July 31,2020 ? Assume Quality Chicken uses the production method of accounting for byproducts. What are the ending inventory values for each joint product on July 31,2020 , assuming breasts and thighs are the joint products and wings, bones, and feathers are byproducts?

Costs of further processing $82.5 $37.5 $67.5

Comment on differences in the results in requirements 1 and 2. The costs of mixing, heating, and extracting the drug amount to $$\$ 90,000$$ per batch. The output sold for human use is pasteurized at a total cost of $$\$ 120,000$$ and is sold for $$\$ 585$$ per gallon. The product sold to veterinarians is irradiated at a cost of $$\$ 10$$ per gallon and is sold for $$\$ 410$$ per gallon. Methods of joint-cost allocation, ending inventory.

Examples of Joint Cost Allocations

Assume that Cloths of Heaven allocates the joint costs to floor mats and car mats using the sales value at splitoff method and accounts for the byproduct using the sales method. Discuss the difference between the two methods of accounting for byproducts, focusing on what conditions are necessary to use each method. Earl’s Hurricane Lamp Oil Company produces both A-1 Fancy and B Grade Oil. There are approximately $$\$ 9,000$$ in joint costs that Earl may allocate using the relative sales value at splitoff or the net realizable value approach.

Cost Allocation: Joint Products and Byproducts – all with Video Answers

• Cloths of Heaven’s accountant needs to record the information about the joint and byproducts in the general journal but is not sure what the entries should be.
• Cloths of Heaven purchases old tires and recycles them to produce rubber floor mats and car mats.
• Carl has set himself up as a purchaser of these captured snakes.
• Given the immateriality of by-product revenues and costs, byproduct accounting tends to be a minor issue.

Quality Chicken’s management wants to use the sales value at splitoff method. However, management wants you to explore the effect on ending inventory values deluxe online 2020 of classifying one or more products as a byproduct rather than a joint product.1. Assume Quality Chicken classifies all five products as joint products.

Later Sales Price:

The company washes, shreds, and molds the recycled tires into sheets. The floor and car mats are cut from these sheets. A small amount of rubber shred remains after the mats are cut. The rubber shreds can be sold to use as cover for paths and playgrounds. The company can produce 25 floor mats, 75 car mats, and 40 pounds of rubber shreds from 100 old tires.

sales value at the split-off point. Unit selling prices and total

Joint products and byproducts (continuation of 17-21). Quality Chicken is computing the ending inventory values for its July 31, 2020, balance sheet. Ending inventory amounts on July 31 are 15 pounds of breasts, 4 pounds of wings, 6 pounds of thighs, 5 pounds of bones, and 2 pounds of feathers. Why might the number of products in a joint-cost situation differ from the number of outputs? Distinguish between a joint product and a byproduct. Carl Jason is a prospector in the Texas Panhandle.

At splitoff, A-1 sells for $$\$ 20,000$$ while B grade sells for $$\$ 40,000$$. After an additional investment of $$\$ 10,000$$ after splitoff, $$\$ 3,000$$ for B grade and $$\$ 7,000$$ for $A-1$, both the products sell for $$\$ 50,000$$. What is the difference in allocated costs for the A-1 product assuming applications of the net realizable value and the sales value at splitoff approach? A-1 Fancy has $$\$ 1,300$$ more joint costs allocated to it under the net realizable value approach than the sales value at splitoff approach.2.

Select Manufacturing Co. produces three joint products and one organic waste byproduct. Assuming the byproduct can be sold to an outside party, what is the correct accounting treatment of the byproduct proceeds received by the firm? Apply sale proceeds on a prorated basis to the joint products’ sales.b. Use the sale proceeds to reduce the common costs in the joint production process.c. Apply the sale proceeds to the firm’s miscellaneous income account.d. (W. Crum adapted) Royston, Inc., is a large food-processing company.

Alternative methods of joint-cost allocation, ending inventories. The KZee Company operates a simple chemical process to convert a single material into three separate items, referred to here as A, B, and C. All three end products are separated simultaneously at a single splitoff point. Provide three reasons for allocating joint costs to individual products or services. Allocating joint costs does not help management, since the resulting information is based on essentially arbitrary allocations. Consequently, the best allocation method does not have to be especially accurate, but it should be easy to calculate, and be readily defensible if it is reviewed by an auditor.

Tivoli Labs produces a drug used for the treatment of hypertension. Chemicals costing $$\$ 60,000$$ are mixed and heated, creating a reaction; a unique separation process then extracts the drug from the mixture. A batch yields a total of 2,500 gallons of the chemicals. The first 2,000 gallons are sold for human use while the last 500 gallons, which contain impurities, are sold to veterinarians.

Cloths of Heaven’s accountant needs to record the information about the joint and byproducts in the general journal but is not sure what the entries should be. The company has hired you as a consultant to help its accountant.1. Show journal entries at the time of production and at the time of sale assuming Cloths of Heaven’s accounts for the byproduct using the production method.2.