Joint-cost allocation. Elsie Dairy Products Corp. buys a single input, full-cream milk, and refines that in a churning process. Via each gallon of milk Elsie generates three glasses of chausser and seven cups of buttermilk. During May 2010, Elsie bought 12, 000 gallons of milk to get $22, two hundred and fifty. Elsie put in another $9, 430 around the churning method to separate the milk in butter and buttermilk. Chausser could be sold immediately intended for $2. 20 per pound and buttermilk could be offered immediately pertaining to $1. twenty per yard (note: two cups = one pound; four glasses = a single quart). Elsie chooses to process the butter even more into spreadable butter by mixing this with canola oil, incurring an additional cost of $1. 60 per pound. This process leads to two tubs of spreadable butter for every pound of butter highly processed. Each tub of spreadable butter markets for $2. 30. Essential
1 . Spend the $31, 680 joint cost to the spreadable rechausser and the buttermilk using the subsequent: a. Physical-measure method (using cups) of joint cost allocation b. Sales benefit at splitoff method of joint cost allowance c. NRV method of joint cost allocation
d. Constant major margin percentage NRV technique of joint price allocation 2 . Each of these actions has advantages and disadvantages; what are they will? 3. A lot of claim that the sales value at break up off technique is the best method to use. Discuss the logic in back of this claim.
|Physical-measure technique: | | | | | |Butter |Buttermilk |Total | | | | | | |Physical measure of total creation |36, 500 cups |108, 000 cups of |144, 000 cups | |(12, 500 gal Г— 3; 12, 000 lady Г— 9) | | | | |Weighting, thirty-six, 000; 108, 000 [pic] 144, 000 |0. twenty-five |0. seventy five | | |Joint costs allocated, | | | | | 0. twenty-five; 0. 75 Г— $31, 680 |$7, 920 |$23, 760 |$31, 680
b. Revenue value for splitoff method:
| |Butter |Buttermilk |Total | |Sales value of total development at splitoff, |$39, six-hundred |$32, 400 |$72, 000 | |18, 000 lbs Г— $2. 20; twenty-seven, 000 gobelet Г— $1. 20 | | | | |Weighting, $39, 600; $32, four hundred [pic] $72, 000 |0. 55 |0. 45 | | |Joint costs allocated, | | | | | zero. 55; zero. 45 ( $31, 680 |$17, 424 |$14, 256 |$31, 680 | | | | |
c. Net realizable worth method:
| |Butter | Buttermilk |Total | |Final sales value of total production, | | | | | 36, 000 tubs ( $2. 40; 27, 1000 quarts ( $1. 20 |$82, 800...
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