Forastero Farms is a leading producer of cocoa beans in South America.It produces two main products from
Question:
Forastero Farms is a leading producer of cocoa beans in South America.It produces two main products from the cocoa bean: sunscreen (from cocoa butter) and hot cocoa mix (from cocoa powder).
As the cost accounting supervisor, you are tasked with allocating the joint costs of production to both products.
Required information:
-Calculate product costs using the net realizable value method (NRV).
-Using the cost allocations from requirement 1, make a product-specific income statement.
Joint costs $ 1,430,000 [from 300,000 pounds of cocoa beans]
Separable costs sunscreen $ 600,000
Separable costs Hot Cocoa Mix $ 500,000
Cocoa beans are processed further to make Cocoa Butter and Cocoa Powder
Cocoa butter Cocoa powder
Beg Inventory (pounds) 0 0
Production 100,000 150,000
Transfer 100,000 150,000
Sales in June
End inventory (pounds) 0 0
Selling price per pound 22 17
Cocoa butter is processed further to make sunscreen Cocoa powder is processed further to make Hot Cocoa Mix
Sunscreen Hot Cocoa Mix
0 0
90,000 125,000
76,000 114,000
14,000 11,000
37 48
Required:
1). Compute the Net Realizable Value (NRV) Method.
2). Compute the Product Line Income statement for month ended June using the NRV Method.