Managerial Accounting

Page 1 of 2

Managerial Accounting

By | Feb. 2012
Page 1 of 2
Problem 19-2: Vt. Sugar Enterprises
Given:
SyrupSugarTotal
Units produced20,0001,00021,000
Unit selling price$15.00$2.00
Total process costs:
After split-off$12,000$280$12,280
Joint costs$100,000

a.Calculate the cost of the syrup if the sugar is considered a by-product and the gross margin from its sale is considered to be a reduction of syrup costs. ProductsSales ValueCosts beyond split-offDifferenceJoint costs allocation Syrup$300,00012,000288,000$99,406

Sugar$2,0002801,720$594
$289,720

Calculation:
288,000x100,000=99,406
289,720

1,720x100,000=594
289,720

SyrupSugar
Joint costs99,406/20,000 =$4.97594/1,000 =$0.59
Costs beyond split-off12,000/20,000 =$0.6280/1,000 =$0.28 Unit Cost$5.57$0.87

a.Answer: The cost of syrup is $4.70/unit if the sugar is considered a by-product and the gross margin from its sale is considered to be a reduction of syrup costs. b.Calculate product costs assuming this company decided to make and sell as much maple sugar as possible after filling all syrup orders (i.e., it regarded syrup and sugar as joint products). Use the sales value method.

ProductsSales ValueCosts beyond split-offDifferenceJoint costs allocation Syrup$300,00012,000288,000$99,406
Sugar$2,0002801,720$594
$289,720

Calculation:
288,000x100,000=99,406
289,720
1,720x100,000=594
289,720

Syrup ProductionSugar Production
Joint costs99,406594
Costs beyond split-off12,000280
Production Cost$111,406$874
TOTAL PRODUCTION COST$112,280