Roundtree Chocolates manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate

Question:

Roundtree Chocolates manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate products:

• Chocolate powder liquor base.

• Milk chocolate liquor base.

These two intermediary products become separately identifiable at a single splitoff point. Every 500 kilograms of cocoa beans yields 20 four-litre containers of chocolate powder liquor base and 30 four-litre containers of milk chocolate liquor base.

The chocolate powder liquor base is further processed into chocolate powder. Every 20 containers of chocolate powder liquor base yields 200 kilograms of chocolate powder. The milk chocolate liquor base is further processed into milk chocolate. Every 30 containers of milk chocolate liquor base yields 340 kilograms of milk chocolate. The following is an overview of the manufacturing operations at Roundtree Chocolates:

Roundtree Chocolates manufactures and distributes chocolate products. It purchases cocoa

Production and sales data for August 2015 are as follows:
• Cocoa beans processed, 5,000 kilograms.
• Costs of processing cocoa beans to splitoff point (including purchase of beans) = $12,000.
ProductionSalesUnit Selling Price
Chocolate powder ......... 2,000 kilograms ..... 2,000 kilograms ......... $4.80 per kilogram
Milk chocolate ............. 3,400 kilograms ...... 3,400 kilograms ......... $6.00 per kilogram
The August 2015 separable costs of processing chocolate powder liquor base into chocolate powder are $5,100. The August 2015 separable costs of processing milk chocolate liquor base into milk chocolate are $10,500.
Roundtree fully processes both of its intermediate products into chocolate powder or milk chocolate. There is an active market for these intermediate products. In August 2015, Roundtree could have sold chocolate powder liquor base for $25.20 a container and milk chocolate liquor base for $31.20 a container.
Required
1. Calculate how the joint costs of $12,000 would be allocated between chocolate powder liquor base and milk chocolate liquor base under each of the following methods:
(a) Sales value at splitoff,
(b) Physical measure (containers),
(c) Estimated NRV, and
(d) Constant gross margin percentage NRV.
2. What is the gross margin percentage of chocolate powder and milk chocolate under methods (a), (b), (c), and (d) in requirement 1?
3. Could Roundtree Chocolates have increased its operating income by a change in its decision to fully process both of its intermediate products?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

Question Posted: