Chapter 13-2 Demonstration Problem Solutions Page 1 Please Send Comments and Corrections to me at [email protected] Demo 13-2-1 ANSWER a. You need to know the joint costs (3 butchers x 5 hours x $16 per hour = $240). Product Units Price Ttl Value Rel. Value X Jt. Cost Jt. Cost Cost/Unit High quality steaks 180 $1.65 $297 297/1583 x $240 = $45.12 $.25 Med quality steaks 220 $1.40 $308 308/1583 x $240 = $46.80 $.21 Low quality steaks 240 $1.20 $288 288/1583 x $240 = $43.68 $.18 Hamburger 300 $ .95 $285 285/158 x $240 = $43.20 $.14 Roasts 200 $1.80 $360 360/158 x $240 = $54.48 $.27 Liver 50 $ .90 $ 45 45/1583 x $240 = $ 6.72 $.13 1190 $1583 b. Product Units Relative Units X Jt.Cost Jt. Cost Cost/Unit High quality steaks 180 180/1190 x $240 = $36.24 $.20 Medm quality steaks 220 220/1190 x $240 = $44.40 $.20 Low quality steaks 240 240/1190 x $240 = $48.48 $.20 Hamburger 300 300/1190 x $240 = $60.48 $.20 Roasts 200 200/1190 x $240 = $40.32 $.20 Liver 50 50/1190 x $240 = $10.08 $.20 1190 Demo 13-2-2 ANSWER Net Realizable Value Method: We do not have a value of the Silverware at the Split-Off Point. All we know is that after it is processed further at a cost of $10,000, the Silverware is worth $250,000. Working backwards we can estimate that the value of the Silverware at the Split-Off Point is $240,000 ($250,000 - $10,000). Now we can allocate the Joint Costs. Product Units Price Ttl Value Relative Value X Jt Cost Jt Cost Add. Ttl Cost Flextin 45K $50 $2,250K $2250K/ 2490K x $550K= $496,988 $496,988 Silverware 500K $.48 $240K $240/2,490K x $550K= $ 53,012 +$10,000 $63,012 545K $2,490K The unit cost of Flextin is $11.04 ($496,988 / 45,000) and the unit cost of the Silverware is $13¢ ($63,012 / 500,000).Chapter 13-2 Demonstration Problem Solutions Page 2 Please Send Comments and Corrections to me at [email protected] Demo 13-2-3 ANSWER a. Sales Value At Split-Off Method: Product Units Price Ttl Value Rel Value X Jt Cost Jt Cost Cost / Unit G 10000 $2.50 $25000 25/82.5 x$50000 = $15152 $1.51 H 15000 $1.75 $26250 26.25/82.5 x$50000 = $15909 $1.06 I 25000 $1.25 $31250 31.25/82.5 x$50000 = $18940 $ .75 50000 $82500 b. Set Off Against Joint Costs: Revenue $82,500 COGS $50,000 Less By-Product [.55 (.70 -.15) x 500] (275) -49,725 Gross Margin $32,775 c. Other Revenue Revenue $82,500 By-Product [.55 (.70 -.15) x 500] 275 Total Revenue $82,775 COGS -$50,000 Gross Margin
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