Problem 1: Red Sauce Canning Company Processes Tomatoes

Question

Problem 1 Red Sauce Canning Company Processes Tomatoes Into Catsup T Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During the summer of 20X2, the joint costs of processing the tomatoes were $420,000. There was no beginning or ending inventories for the summer. Production and sales value information for the summer is as follows: Product: Catsup, Cases: 100,000, Sales Value at Splitoff Point: $6 per case, Separable Costs: $3.00 per case, Selling Price: $28 per case Product: Juice, Cases: 150,000, Sales Value at Splitoff Point: $8 per case, Separable Costs: $5.00 per case, Selling Price: $25 per case Product: Canned, Cases: 200,000, Sales Value at Splitoff Point: $5 per case, Separable Costs: $2.50 per case, Selling Price: $10 per case Determine the amount allocated to each product if the estimated net realizable value method is used, and compute the cost per case for each product.

Dr. Jack HW Helper · Accepted Answer

The problem involves allocating joint costs among different products using the estimated net realizable value (NRV) method and calculating the cost per case for each product. This process provides insights into product profitability and helps in pricing strategies. Introduction Joint costs are costs incurred up to the split-off point in a production process where multiple products are produced simultaneously. Proper allocation of these costs is essential for accurate product costing, profitability analysis, and decision-making. The estimated net realizable value method allocates joint costs based on the proportion of each product's NRV at the split-off point, ensuring that each product bears a fair share of the total costs. This approach considers both the sales value and separable costs associated with each product, providing a more precise allocation compared to physical measures alone. Allocating Joint Costs Using the NRV Method To allocate joint costs using the NRV method, we first calculate the NRV for each product at the split-off point. The NRV is obtained by subtracting the separable costs from the sales value: NRV for Catsup = ($6 per case 100,000 cases) - ($3 per case 100,000 cases) = $600,000 - $300,000 = $300,000 NRV for Juice = ($8 per case 150,000 cases) - ($5 per case 150,000 cases) = $1,200,000 - $750,000 = $450,000 NRV for Canned = ($5 per case 200,000 cases) - ($2.50 per case 200,000 cases) = $1,000,000 - $500,000 = $500,000 The total NRV is the sum of the individual NRVs: Total NRV = $300,000 + $450,000 + $500,000 = $1,250,000 The next step is to allocate the total joint costs ($420,000) based on the proportion of each product's NRV: Allocation for Catsup = ($300,000 / $1,250,000) $420,000 ≈ 0.24 $420,000 = $100,800 Allocation for Juice = ($450,000 / $1,250,000) $420,000 ≈ 0.36 $420,000 = $151,200 Allocation for Canned = ($500,000 / $1,250,000) $420,000 ≈ 0.40 $420,000 = $168,000 Calculating Cost per Case Cost per case for each product is obtained

Problem 1: Red Sauce Canning Company Processes Tomatoes

Problem 1 Red Sauce Canning Company Processes Tomatoes Into Catsup T

Paper For Above instruction

Introduction

Allocating Joint Costs Using the NRV Method

Calculating Cost per Case

Conclusion

References