Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery 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 October.Trees processed:
50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)
Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock.
-What are the paper's and the pencil's approximate weighted cost proportions using the sales value at splitoff method, respectively?
A)28.57% and 71.43%
B)33.33% and 66.67%
C)40% and 60%
D)49.00% and 51.00%
E)50.00% and 50.00%

Question

Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery 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 October.Trees processed:
50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)
  Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock.
-What are the paper's and the pencil's approximate weighted cost proportions using the sales value at splitoff method, respectively?
A)28.57% and 71.43% 
B)33.33% and 66.67% 
C)40% and 60% 
D)49.00% and 51.00% 
E)50.00% and 50.00%

Quizplus · Accepted Answer

Using the sales value at splitoff method, we allocate the joint cost to each product based on its relative sales value at the splitoff point. In this case, both products (paper and pencil casings) are sold in equal amounts, so we can allocate the joint cost evenly between them: 
Joint cost per unit = $1,500 / (30,000 sheets of paper + 30,000 pencil casings) = $0.025 per unit
Paper cost per unit = $0.025 per unit x 30,000 sheets of paper = $750
Pencil casings cost per unit = $0.025 per unit x 30,000 pencil casings = $750
To find the weighted cost proportions, we divide the cost per unit for each product by the total cost per unit (which is the sum of the cost per unit for both products): 
Paper weighted cost proportion = $750 / ($750 + $750) = 0.5 or 50%
Pencil casings weighted cost proportion = $750 / ($750 + $750) = 0.5 or 50%
Therefore, the answer is E) 50.00% and 50.00%.

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