7 4:13 PM Review Quiz: Chapter 16 Quiz 50 of 50 pts 2of2 Test 99.32 of 100 pts E

Question

7 4:13 PM Review Quiz: Chapter 16 Quiz 50 of 50 pts 2of2 Test 99.32 of 100 pts E16-28 Nervana Soy Products (NSP) buys saybeans and processes them into other soy products. E gallons of soy oi Apound of soy meal can be sold at splat for $1 32 and soy ol oan be sold in bulk for $4 5 per galon of soy cookies can be sold for $2 32 per pound. The 100 galions of soy ol can be cost of $230 and made into 400 quarts of Soyola. Each quart of Soyola can be sold for $1.1 a. Sales value at splitofl method b. NRV method Cookiest Soyola Sey OilTotl Pro

Explanation / Answer

1) Cookies/ Soymeal Soyola/ Soy Oil Total a. Sales value at splitoff method: Sales value of total production at splitoff, 650lbs × $1.32; 100 gallons × $4.50 (a) $858.00 $450.00 $1,308.00 Weighting, $858; $450 ÷ $1308 Joint costs allocated (b) 65.60% 34.40% 100.00% Joint costs allocated (350+210) x weights $367.34 $192.66 $560.00 b. Net realizable value method: Cookies/ Soymeal Soyola/ Soy Oil Total Final sales value of total production, 650lbs × $2.32; 400qts × $1.15 $1,508.00 $460.00 $1,968.00 Deduct separable costs $300.00 $230.00 $530.00 Net realizable value $1,208.00 $230.00 $1,438.00 Weights 84.01% 15.99% 100.00% Joint costs allocated (350+210) x weights $470.43 $89.57 $560.00 2) Cookies/ Soymeal Soyola/ Soy Oil Revenue if sold at splitoff $858.00 $450.00 Process further NRV $1,208.00 $230.00 Profit (Loss) from processing further $350.00 -$220.00 Nervana should process the soy meal into cookies because it increases profit by $350 (1208-858) but they should sell the soy oil as is, without processing it into the form of Soyola as it decreases profit by $220(230-450) The total joint cost is the same under both allocation methods, it is not a relevant cost to the decision to sell at splitoff or process further.

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