Net realizable value Constant gross margin percentage NRV Compute the gross marg
ID: 2481563 • Letter: N
Question
Net realizable value Constant gross margin percentage NRV Compute the gross margin percentages for Extreme Chocolate 8nd Very Strawberry under each of the methods in requirement 1. Collaborative Learning Problem Joint Cost Allocation, processing further and ethics. Unified Chemical Company has a joint production process that converts Zeta into two chemicals: Alpha and Beta. The company purchases Zeta for SI2 per pound and incurs a cost of $30 per pound to process it into Alpha and Beta. For every 10 pounds of Zeta, the company can produce 8 pounds of Alpha and 2 pounds of Beta. The selling price for Alpha and Beta are $76.50 and $144.00, respectively. Unified Chemical generally processes Alpha and Beta further in separable processes to produce more refined products. Alpha is processed separately into Alphalite at a cost of $25.05 per pound. Beta is processed separately into Betalite at a cost of $112.80 per pound. Alphalite and Betalite sell for $105 and $285 per pound, respectively. In the most recent month. Unified Chemical purchased 15,000 pounds of Zeta. The company had no beginning or ending inventory of Zeta. Allocate the joint costs to Alphalite and Betalite under the following methods: Sales value at splitoff Physical measure (pounds) Net realizable value Constant gross margin percentage NRV Unified Chemical is considering an opportunity to process Betalite further into a new product called Ultra-Betalite. The separable processing will cost $85 per pound and expects an additional $15 per pound packaging cost for Ultra-Betalite. The expected selling price would be $360 per pound. Should Unified Chemical sell Betalite or Ultra-Betalite? What selling price for Ultra-Betalite would make XOnified Chemical indifferent between selling Betalite and Ultra-Betalite? Independent of your answer to requirement (2). suppose Danny Dugard, the assistant controller, has completed an analysis that shows Ultra-Betalite should not be produced. Before presenting his results to top management, he received a visit from Sally Kemper. Sally had been personally responsible for developing Ultra-Betalite and was upset to learn that it would not be manufactured. Sally: The company is making a big mistake by passing up this opportunity. Ultra-Betalite will be a big seller and will get us into new markets. Danny: But the analysis shows that we would be losing money on every pound of Ultra-Betalite we manufacture. Sally: But that is a temporary problem. Eventually the cost of processing will be reducedExplanation / Answer
Joint Cost of Zeta $ Material cost(15000 pound @$12) 180,000 Further processing cost (15000@$30) 450,000 Total Joint Cost 630,000 (1) (2) Pounds Sales price at split of point $ Sales value at split of point $ Allocation of Joint cost - sales value at splitt off point(in the ratio918:432) Of $630,000 Physical measures (In the ratio of 12000:3000) Alpha Production of Alpha (15000 pound/10*8) 12000 76.5 918,000 428,400 504,000 Beta Production of Beta (15000 pound/10*2) 3000 144.0 432,000 201,600 126,000 Total 15000 1,350,000 630,000 630,000 (3) Net realisable value method Alphalite$ Betalite $ Total Final sales value 105.00 285.00 Less: Seperable Cost 25.05 112.80 NRV 79.95 172.2 Production pound 12,000 3,000 Total NRV 959,400 516,600 1,476,000 Allocation of joint cost $630,000 in the ratio of NRV (9594:5166) 409,500 220,500 630,000 (4) Alphalite$ Betalite $ Total $ Final sales value 1,260,000 855,000 2,115,000 ($105*12000 pounds) ($285*3000 pounds) Less: Seperable Cost 300,600 338,400 639,000 ($25.05*12000 pounds) ($112.8*3000 pounds) Less :Joint Cost 409,500 220,500 630,000 Gross Margin 846,000 Gross Margin % (Gross margin / Total sales) 40 Allocation of joint cost using Gross margin % Alphalite$ Betalite $ Total $ Final sales value 1,260,000 855,000 2,115,000 Less: Gross margin 40% of sale 504,000 342,000 846,000 Production Cost 756,000 513,000 1,269,000 Less:Seperable Cost 300,600 338,400 639,000 Allocation of joint cost 455,400 174,600 630,000