Question

The Paint Palette Company produces two products, premium paint and regular paint, by a joint process. Joint costs amount to $10,000 per batch of output. Each batch totals 1,000 gallons, 30% premium and 70% regular. Both products are processed further.
Separable processing costs:
Premium .... $4.00 per gallon
Regular ....... $1.00 per gallon
Selling price:
Premium ..... $20.00 per gallon
Regular ..... $10.00 per gallon

REQUIRED
A. Allocate the joint costs according to the physical output method.
B. Allocate the joint costs according to the net realizable value method.
C. Allocate the joint costs according to the constant gross margin NRV method.
D. The company has discovered an additional process by which the regular paint can be made into paint that dries extremely quickly. The new selling price would be $22 per gallon. Additional processing would increase separable costs by $11 (in addition to the $1 separable cost required to yield regular). Assuming no other changes in cost, determine whether the company should begin producing quick-drying paint. Create a schedule that shows how you made the decision.



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  • CreatedJanuary 26, 2015
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