Georgia Chemical makes three widely used industrial adhesives: G121, G143, and G189. See sales and production information
Question:
Georgia Chemical makes three widely used industrial adhesives: G121, G143, and G189. See sales and production information for a gallon of each of the three adhesives in the following table. Most of Georgia's customers ask for a special blend of the three products which improves heat-resistance.
The additional processing requires additional time and materials, and the price is increased accordingly, as shown in the table. Assume that Georgia produces only for specific customer orders, so there is no beginning or ending inventory. Assume also that all of Georgia's customers requested the heat-resistant version of the product, so that all production required additional processing.
G121 | G143 | G189 | ||
Units Sold | 125,000 | 100,000 | 75,000 | |
Price (after addt'l processing) | $30 | $20 | $25 | |
Separable processing cost | $550,000 | $125,000 | $625,000 | |
Total joint cost | $4,200,000 | |||
Sales price at split-off | $10 | $8 | $12 | |
Required
1. Calculate the product cost of each of the three product lines using the following methods: (a) physical unit method, (b) sales value at split off method, and (c) the net realizable value method.
2. Which of the three methods do you think would be preferred in this case?Why?
Ending InventoryThe ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins