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    Final Quiz 1

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    maysel qt
    Bulacan Chemicals produces copra, vinegar, and alcohol from coconut. It incurred joint costs of P100,000 to produce 1,200 tons of copra and 800 tons of vinegar in July 2018. The vinegar was further processed into 500 tons of alcohol. The document discusses three methods to allocate the joint costs between copra and vinegar: sales value at split-off, physical measure, and net realizable value. It also calculates the gross margin percentage of copra and alcohol under each method. Finally, it analyzes how accepting an offer to purchase 800 tons of vinegar would affect Bulacan's operating income in August 2018.

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    Final Quiz 1

    Uploaded by

    maysel qt
    806 views4 pages
    Bulacan Chemicals produces copra, vinegar, and alcohol from coconut. It incurred joint costs of P100,000 to produce 1,200 tons of copra and 800 tons of vinegar in July 2018. The vinegar was further processed into 500 tons of alcohol. The document discusses three methods to allocate the joint costs between copra and vinegar: sales value at split-off, physical measure, and net realizable value. It also calculates the gross margin percentage of copra and alcohol under each method. Finally, it analyzes how accepting an offer to purchase 800 tons of vinegar would affect Bulacan's operating income in August 2018.

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    final quiz

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    FINAL QUIZ 1

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    Bulacan Chemicals produces copra, vinegar, and alcohol from coconut. It incurred joint costs of P100,000 to produce 1,200 tons of copra and 800 tons of vinegar in July 2018. The vinegar was further processed into 500 tons of alcohol. The document discusses three methods to allocate the joint costs between copra and vinegar: sales value at split-off, physical measure, and net realizable value. It also calculates the gross margin percentage of copra and alcohol under each method. Finally, it analyzes how accepting an offer to purchase 800 tons of vinegar would affect Bulacan's operating income in August 2018.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    806 views4 pages

    Final Quiz 1

    Uploaded by

    maysel qt
    Bulacan Chemicals produces copra, vinegar, and alcohol from coconut. It incurred joint costs of P100,000 to produce 1,200 tons of copra and 800 tons of vinegar in July 2018. The vinegar was further processed into 500 tons of alcohol. The document discusses three methods to allocate the joint costs between copra and vinegar: sales value at split-off, physical measure, and net realizable value. It also calculates the gross margin percentage of copra and alcohol under each method. Finally, it analyzes how accepting an offer to purchase 800 tons of vinegar would affect Bulacan's operating income in August 2018.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 4

    PROBLEM 14 - 1: Allocation of Joint Cost

    Bulacan Chemicals purchases coconut and processes it into products such as copra, vinegar and alcohol.
    In July 2018, Bulacan purchased coconut for P40,000. Conversion costs of P60,000 were incurred up to the split-off point,
    at which time two salable products were produced: copra and vinegar.
    Vinegar can be further processed into alcohol.

    The July 2018 production and sales data are:


    Production (tons) Sales (tons) Sales Price per Ton
    Copra 1,200 1,200 50.00
    Vinegar 800 75.00
    Alcohol 500 500 200.00

    All 800 tons of vinegar were further processed, at an incremental cost of P20,000, to yield 500 tons of alcohol.
    There were no beginning or ending inventories of copra, vinegar, or alcohol in July.
    There is an active market for vinegar. Bulacan Products could have sold all of its July production of vinegar at P75 a ton.

    Required:
    1. Allocate the joint costs of P100,000 between copra and vinegar under the:
    (a) Sales Value at Split-off Method
    Copra Vinegar
    1. Sales value at spilt-off point: 60,000.00 60,000.00
    2. Ratio: 50% 50%
    3. Allocated Joint Costs: 50,000.00 50,000.00

    (b) Physical Measure (tons) Method


    Copra Vinegar
    1. Physical Measures (tons) 1,200 800
    2. Ratio: 60% 40%
    3. Allocated Joint Costs: 60,000.00 40,000.00

    (c) Net Realizable Value (NRV) Method


    Copra Alcohol
    1. Sales value before allocation: 60,000.00 100,000.00
    2. LESS: Incremental cost - 20,000.00
    3. Adjusted Sales Value 60,000.00 80,000.00
    4. Ratio: 43% 57%
    5. Allocated Joint Costs: 42,857.14 57,142.86

    2. What is the gross margin percentage of (a) copra and (b) alcohol under the three allocation methods in no. 1?
    (a) Sales Value at Split-off Method
    Bulacan Products
    Income Statement
    For July 2018
    Copra Alcohol
    Revenues: 60,000.00 100,000.00
    COGS: Joint Costs 50,000.00 50,000.00
    Incremental cost - 20,000.00
    Gross Margin 10,000.00 30,000.00
    Gross Profit Rate: 17% 30%

    (b) Physical Measure (tons) Method


    Bulacan Products
    Income Statement
    For July 2018
    Copra Alcohol
    Revenues: 60,000.00 100,000.00
    COGS: Joint Costs 60,000.00 40,000.00
    Incremental Cost - 20,000.00
    Gross Margin - 40,000.00
    Gross Profit Rate: 0% 40%

    (c) Net Realizable Value (NRV) Method


    Bulacan Products
    Income Statement
    For July 2018
    Copra Alcohol
    Revenues: 60,000.00 100,000.00
    COGS: Joint Costs 42,857.14 57,142.86
    Incremental Cost - 20,000.00
    COG available for sale 42,857.14 77,142.86
    Gross Margin 17,142.86 22,857.14
    Gross Profit Rate 29% 23%

    3. Laguna Chemicals offers to purchase 800 tons of vinegar in August 2018 at P75 a ton. This sale would mean that no alcohol
    in August. How would accepting this offer affect Bulacan's August 2018 operating income?

    Incremental revenues from further processing of vinegar into alcohol:


    Sales from alcohol: 100,000.00
    Sales from vinegar: 60,000.00
    Difference of the sales: 40,000.00
    Incremental cost: 20,000.00
    Incremental operating income: 20,000.00

    EXPLAIN: It can be sought that the Bulacan will get higher operating income if they sold alcohol (vinegar after further processin
    So if the Bulacan will accept the offer of Laguna Chemicals of purchasing the 800 tons of vinegar (without further pr
    Therefore, the effect on Bulacan's August 2018 operating income would be reduced by P20,000 if Bulacan sold the
    p to the split-off point,

    s of alcohol.

    vinegar at P75 a ton.

    Total
    120,000.00

    100,000.00

    Total
    2,000

    100,000.00

    Total
    160,000.00
    20,000.00
    140,000.00

    100,000.00

    hods in no. 1?

    Total
    160,000.00
    100,000.00
    20,000.00
    40,000.00
    25%

    Total
    160,000.00
    100,000.00
    20,000.00
    40,000.00
    25%

    Total
    160,000.00
    100,000.00
    20,000.00
    120,000.00
    40,000.00
    25%

    would mean that no alcohol would be produced

    negar after further processing) with gaining an amount of P100,000 of sales.


    vinegar (without further processing) at P75 per ton, then Bulacan's operating income will decrease P20,000.
    P20,000 if Bulacan sold the 800 tons of vinegar at P75 per ton.

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