Question

St. Paul Milling buys oats at $.80 per pound and produces SPM Oat Flour, SPM Oat Flakes, and SPM Oat Bran. The process of separating the oats into oat flour and oat bran costs $.40 per pound. The oat flour can be sold for $1.50 per pound, the oat bran for $2.00 per pound. Each pound of oats has .2 pounds of oat bran and .8 pounds of oat flour. A pound of oat flour can be made into oat flakes for a fixed cost of $240,000 plus a variable cost of $.60 per pound. St. Paul Milling plans to process 1 million pounds of oats in 20X0, at a purchase price of $800,000.
1. Allocate all the joint costs to oat flour and oat bran using the physical-units method.
2. Allocate all the joint costs to oat flour and oat bran using the relative-sales-value method.
3. Suppose there were no market for oat flour. Instead, it must be made into oat flakes to be sold. Oat flakes sell for $2.90 per pound. Allocate the joint cost to oat bran and oat flakes using the relative-sales-value method.



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  • CreatedNovember 19, 2014
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