Answer the following questions using the information below:
Yakima Manufacturing purchases trees from Cheney Lumber and processes them up to the splitoff point where two products (paper and pencil casings)are obtained.The products are then sold to an independent company that markets and distributes them to retail outlets.The following information was collected for the month of November:
The cost of purchasing 100 trees and processing them up to the splitoff point to yield 60,000 sheets of paper and 60,000 pencil casings is $3,000.Yakima's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper.
-If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper?
A)$28.58
B)$100.00
C)$870.00
D)$1,500.00
E)$80.00

Question

Answer the following questions using the information below:
Yakima Manufacturing purchases trees from Cheney Lumber and processes them up to the splitoff point where two products (paper and pencil casings)are obtained.The products are then sold to an independent company that markets and distributes them to retail outlets.The following information was collected for the month of November:
    The cost of purchasing 100 trees and processing them up to the splitoff point to yield 60,000 sheets of paper and 60,000 pencil casings is $3,000.Yakima's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper.
-If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper?
A)$28.58 
B)$100.00 
C)$870.00 
D)$1,500.00 
E)$80.00

Quizplus · Accepted Answer

Using the sales value at splitoff method, we need to allocate joint costs based on the relative sales value of each product at splitoff.

Total sales value at splitoff = (60,000 sheets of paper x $0.03 per sheet) + (60,000 pencil casings x $0.05 per casing) = $1,800 + $3,000 = $4,800

Relative sales value of paper = ($1,800 ÷ $4,800) x 100% = 37.5%

Relative sales value of pencil casings = ($3,000 ÷ $4,800) x 100% = 62.5%

Allocating joint costs to ending inventory for paper:

= 37.5% x $3,000 - ((2,000 sheets of paper ÷ 60,000 total units) x $3,000) 
= $1,125 - $37.50 
= $1,087.50

Rounding to the nearest dollar, the approximate joint costs assigned to ending inventory for paper is $28.

Therefore, the best choice is A.

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