question archive PROBLEM 1 Maroon Ltd is a company that produces chemicals for the cleaning industry
PROBLEM 1 Maroon Ltd is a company that produces chemicals for the cleaning industry
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PROBLEM 1
Maroon Ltd is a company that produces chemicals for the cleaning industry. One of its processes manufactures join products Y and Z, and by-product X. The company uses the net realizable value of its joint products to allocate joint production costs. The by-product is valued for inventory purposes at its market value less its disposal cost, and this value is used to reduce the joint production cost of P2,015,000. Information regarding the company's August 2020 operations are presented below:
In liters
Finished Goods inventory, August 1
Y = 30,000
Z = 100,000
X = 40,000
August Sales
Y = 1,340,000
Z = 760,000
X = 240,000
August Production
Y= 1,600,000
Z = 800,000
X = 200,000
In Peso
Further Processing cost
Y = 1,400,000
Z = 1,520,000
X = no amount
Final Sales value per Liter
Y = 10
Z = 14
X = no amount
Sales value per liter at split off
Y = no amount
Z = no amount
X = 2.40
Disposal Cost per liter
Y = no amount
Z = no amount
X = 0.40
Required:
1. Calculate the by-product income
2. Calculate the adjusted joint cost for allocation for August
3. Calculate the allocation of joint cost for August for products Y and Z
4. Calculate the unit cost per product and value of closing inventory
5. The company has an opportunity to sell product Z at split off for P10 per liter. Construct an analysis to show whether Z should be sold at split off point or further processing.
6. Split your joint costs between joint products using physical unit method.
PROBLEM 2
Pink Inc. manufactures Zen products from a process that yield a by-product called YAN. The by-product requires additional processing cost of P30,000. The by-product will require selling and administrative expenses totalling P20,000. It is the company's policy to charge the joint costs to the main product only. Information concerning a batch produced during the year ended December 31, 202x. follows:
Product ZEN
Units produced: 100,0000
Market value of Split off: P50
Units sold: 60,000
Product YAN
Units produced: 8,000
Market value of Split off: P10
Units sold: 8,000
The joint costs incurred up to the split-off point are:
Raw materials: P2,000,000
Direct labor: 800,000
Factory overhead: 200,000
The selling and administrative expense of EEE Inc. is P1,000,000 exclusive of that for the by-product.
Compute:
1. Gross profit if the net revenue from the by-product is presented as other income
2. Gross profit if the net revenue from the by-product is presented as additional sales revenue
3. Net income if the net revenue from the by-product is presented as deduction from cost of goods sold
4. Net income if the net revenue from the by-product is presented as deduction from the total manufacturing cost of the main product
