The Universal Solutions Co. (USC) operates several plants that process raw material X and yield three...

 

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The Universal Solutions Co. (USC) operates several plants that process raw material X and yield three outputs: rough nut, natural nut, and flexi nut. The first two outputs are solids, measured in tons, and the third is a liquid, also measured in tons. The company assumes for its costing purposes that all three outputs are jointly produced until a single split off point, at which each output appears separately and is then further processed individually. For April 2019, the following data apply: • Rough-150 tons produced and sold at $ 900 per ton. Separable costs beyond the split off point are S8,750. This produces Rough 1, used by the paper industry. • Natural-50 tons produced and sold at $ 7,500 per ton. Separable costs beyond the split off point are $5,250. This produces Natural 1, used by the construction industry. • Flexi-800 tons produced and sold at $65 per ton. Separable costs beyond the split off point are $10,500. This produces Flexi 1, used in the production of detergents. USC acquired raw material X for $70,000 in April. Operations cost of the plants up to split off point was $20,000. From this same production process, a product of relatively low sales value is also produced, called bendy nut. Bendy is a grainy solid, which can be processed further to earn higher sales, but the company chooses to sell it in its original form, earning from the sheer volume sold. 2,000 tons of bendy were produced in April, and sold in May, at an average price of $120 per ton. Required: a. Draw a diagram showing the joint cost situation for USC. b. Allocate the April 2019 joint cost among the three main products, ignoring Bendy, and using the net realizable value method (NRV). e. Show the operating income for each product using the NRV method. d. Discuss how the 2,000 tons of Bendy will differently affect the income statement if it is accounted for using the production method versus the sales method. The Universal Solutions Co. (USC) operates several plants that process raw material X and yield three outputs: rough nut, natural nut, and flexi nut. The first two outputs are solids, measured in tons, and the third is a liquid, also measured in tons. The company assumes for its costing purposes that all three outputs are jointly produced until a single split off point, at which each output appears separately and is then further processed individually. For April 2019, the following data apply: • Rough-150 tons produced and sold at $ 900 per ton. Separable costs beyond the split off point are S8,750. This produces Rough 1, used by the paper industry. • Natural-50 tons produced and sold at $ 7,500 per ton. Separable costs beyond the split off point are $5,250. This produces Natural 1, used by the construction industry. • Flexi-800 tons produced and sold at $65 per ton. Separable costs beyond the split off point are $10,500. This produces Flexi 1, used in the production of detergents. USC acquired raw material X for $70,000 in April. Operations cost of the plants up to split off point was $20,000. From this same production process, a product of relatively low sales value is also produced, called bendy nut. Bendy is a grainy solid, which can be processed further to earn higher sales, but the company chooses to sell it in its original form, earning from the sheer volume sold. 2,000 tons of bendy were produced in April, and sold in May, at an average price of $120 per ton. Required: a. Draw a diagram showing the joint cost situation for USC. b. Allocate the April 2019 joint cost among the three main products, ignoring Bendy, and using the net realizable value method (NRV). e. Show the operating income for each product using the NRV method. d. Discuss how the 2,000 tons of Bendy will differently affect the income statement if it is accounted for using the production method versus the sales method.