Question 16 (2.5 points) Red Sauce Canning Company processes tomatoes into catsu

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Question 16 (2.5 points)

Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During November, they incurred joint processing costs of $420,000. Production and sales value information for November are as follows:
  

Product

Cases

Selling Price/Case

Additional Costs/Case

Catsup

100,000

$10

$2

Tomato Juice

150,000

$8

$1

Canned Tomatoes

250,000

$12

$3

If the company has a philosophy of marking up their products 20% over cost, the selling price per case of Tomato Juice should be (using the net realizable value method) (round to 2 decimal places)

Question 16 options:

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Question 17 (2.5 points)

Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During November, they incurred joint processing costs of $420,000. Production and sales value information for November are as follows:

Product

Cases

Selling Price/Case

Additional Costs/Case

Catsup

100,000

$10

$2

Tomato Juice

150,000

$8

$1

Canned Tomatoes

250,000

$12

$3

The unit cost per case of Canned Tomatoes (using the physical volume method) is (round to 2 decimal places)

Question 17 options:

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Question 18 (2.5 points)

A cost that is incurred between the split-off point and the point of sale is known as a:

Question 18 options:

Unit cost

Split-off cost

Separable cost

Joint cost

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Question 19 (2.5 points)

Company X uses a joint processing system for it's 2 products Y & Z. As a result of using the physical volume method of joint cost allocation instead of the net realizable value method, they have overstated the unit cost for product Z and understated the unit cost for product Y. If Company X prepares separate financial statements for each of the 2 products, which of the following statements is true

Question 19 options:

Gross Margin for product Z will be overstated

Net Income for product Y will be overstated

COGS for product Z will be overstated

There will be no effect on the Income Statements for either Y or Z

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Question 20 (2.5 points)

Zell Company derives two products, Great and Grand, from a single process. Great and Grand can be sold either as is or after further processing. Costs and selling prices are as follows:

Product

Gallons

Selling Price (as is)

Additional Processing Costs

Selling price (after processing)

Great

30,000

$8/gallon

$50,000

$10/gallon

Grand

20,000

$6/gallon

$80,000

$9.50/gallon

Which of the following products should Zell Company process further?

Question 20 options:

Grand only

Great only

neither Great nor Grand

both Great and Grand

Product

Cases

Selling Price/Case

Additional Costs/Case

Catsup

100,000

$10

$2

Tomato Juice

150,000

$8

$1

Canned Tomatoes

250,000

$12

$3

Explanation / Answer

Red Sauce Company           16 Details Cases Selling Price/Case Additional cost /case Net Realizable Price/case Net Realizable Value % wt of net realizable value Allocation of Joint Cost on Net ralizable value basis Catsup         100,000                       10                        2                     8         800,000 19.51%              81,951 Tomato Juice         150,000                         8                        1                     7     1,050,000 25.61%           107,561 Canned Tomato         250,000                       12                        3                     9     2,250,000 54.88%           230,488 Total       4,100,000           420,000 Total Cost Of Tomato Juice=         107,561 Cost of Tomato Juice/case=                0.72 Cost +20% mark Up= $           0.86 So Price per case of Tomato Juice= $           0.86           17 Details Cases Selling Price/Case Additional cost /case % of total cases Allocation of Joint Cost on physical volume basis Catsup         100,000                       10                        2 20.00%           84,000 Tomato Juice         150,000                         8                        1 30.00%         126,000 Canned Tomato         250,000                       12                        3 50.00%         210,000 Total           500,000         420,000 Total Cost Of Tomato Juice=         126,000 Cost of Tomato Juice/case= $           0.84           18 A cost that is incurred between split off point and the point of sale is called   Separable cost           19 As the unit cost of Z overstated and Unit cost of Y understated , the Net Income   of product Y will be overstated   and also COGS of product Z will be overstated.           20 Product Gallons Selling Price (as is) Additional Processing Costs Selling price (after processing) Incremetal Sales value Incremental Profit after additional processing   Great 30,000 $8/gallon $50,000 $10/gallon           60,000             10,000 Grand 20,000 $6/gallon $80,000 $9.50/gallon           70,000           (10,000) So Zell should process further : Great Only

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