Question 16 (2.5 points) Red Sauce Canning Company processes tomatoes into catsu
ID: 2470130 • Letter: Q
Question
Question 16 (2.5 points)
Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During November, they incurred joint processing costs of $420,000. Production and sales value information for November are as follows:
Product
Cases
Selling Price/Case
Additional Costs/Case
Catsup
100,000
$10
$2
Tomato Juice
150,000
$8
$1
Canned Tomatoes
250,000
$12
$3
If the company has a philosophy of marking up their products 20% over cost, the selling price per case of Tomato Juice should be (using the net realizable value method) (round to 2 decimal places)
Question 16 options:
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Question 17 (2.5 points)
Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During November, they incurred joint processing costs of $420,000. Production and sales value information for November are as follows:
Product
Cases
Selling Price/Case
Additional Costs/Case
Catsup
100,000
$10
$2
Tomato Juice
150,000
$8
$1
Canned Tomatoes
250,000
$12
$3
The unit cost per case of Canned Tomatoes (using the physical volume method) is (round to 2 decimal places)
Question 17 options:
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Question 18 (2.5 points)
A cost that is incurred between the split-off point and the point of sale is known as a:
Question 18 options:
Unit cost
Split-off cost
Separable cost
Joint cost
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Question 19 (2.5 points)
Company X uses a joint processing system for it's 2 products Y & Z. As a result of using the physical volume method of joint cost allocation instead of the net realizable value method, they have overstated the unit cost for product Z and understated the unit cost for product Y. If Company X prepares separate financial statements for each of the 2 products, which of the following statements is true
Question 19 options:
Gross Margin for product Z will be overstated
Net Income for product Y will be overstated
COGS for product Z will be overstated
There will be no effect on the Income Statements for either Y or Z
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Question 20 (2.5 points)
Zell Company derives two products, Great and Grand, from a single process. Great and Grand can be sold either as is or after further processing. Costs and selling prices are as follows:
Product
Gallons
Selling Price (as is)
Additional Processing Costs
Selling price (after processing)
Great
30,000
$8/gallon
$50,000
$10/gallon
Grand
20,000
$6/gallon
$80,000
$9.50/gallon
Which of the following products should Zell Company process further?
Question 20 options:
Grand only
Great only
neither Great nor Grand
both Great and Grand
Product
Cases
Selling Price/Case
Additional Costs/Case
Catsup
100,000
$10
$2
Tomato Juice
150,000
$8
$1
Canned Tomatoes
250,000
$12
$3
Explanation / Answer
Red Sauce Company 16 Details Cases Selling Price/Case Additional cost /case Net Realizable Price/case Net Realizable Value % wt of net realizable value Allocation of Joint Cost on Net ralizable value basis Catsup 100,000 10 2 8 800,000 19.51% 81,951 Tomato Juice 150,000 8 1 7 1,050,000 25.61% 107,561 Canned Tomato 250,000 12 3 9 2,250,000 54.88% 230,488 Total 4,100,000 420,000 Total Cost Of Tomato Juice= 107,561 Cost of Tomato Juice/case= 0.72 Cost +20% mark Up= $ 0.86 So Price per case of Tomato Juice= $ 0.86 17 Details Cases Selling Price/Case Additional cost /case % of total cases Allocation of Joint Cost on physical volume basis Catsup 100,000 10 2 20.00% 84,000 Tomato Juice 150,000 8 1 30.00% 126,000 Canned Tomato 250,000 12 3 50.00% 210,000 Total 500,000 420,000 Total Cost Of Tomato Juice= 126,000 Cost of Tomato Juice/case= $ 0.84 18 A cost that is incurred between split off point and the point of sale is called Separable cost 19 As the unit cost of Z overstated and Unit cost of Y understated , the Net Income of product Y will be overstated and also COGS of product Z will be overstated. 20 Product Gallons Selling Price (as is) Additional Processing Costs Selling price (after processing) Incremetal Sales value Incremental Profit after additional processing Great 30,000 $8/gallon $50,000 $10/gallon 60,000 10,000 Grand 20,000 $6/gallon $80,000 $9.50/gallon 70,000 (10,000) So Zell should process further : Great Only