Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point where two products (paper and pencil casings) emerge from the process. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of October:

The cost of purchasing 270 trees and processing them up to the split-off point to yield 180,000 sheets of paper and 180,000 pencil casings is $15,000.
Bismite's accounting department reported no beginning inventory.
What are the paper's and the pencil's approximate weighted cost proportions using the sales value at
Split-off method, respectively?
A) 50.00% and 50.00%
B) 45.06% and 54.94%
C) 48.54% and 51.46%
D) 46.51% and 53.49%

Question

Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point where two products (paper and pencil casings) emerge from the process. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of October:

The cost of purchasing 270 trees and processing them up to the split-off point to yield 180,000 sheets of paper and 180,000 pencil casings is $15,000.
Bismite's accounting department reported no beginning inventory.
What are the paper's and the pencil's approximate weighted cost proportions using the sales value at
Split-off method, respectively?
A) 50.00% and 50.00% 
B) 45.06% and 54.94% 
C) 48.54% and 51.46% 
D) 46.51% and 53.49%

Quizplus · Accepted Answer

Paper: 180,000 sheets × $0.20 = $36,000
Pencils: 180,000 casings × $0.23 = $41,400
Weighted cost proportions - Paper: $36,000 / ($36,000 + $41,400) = 46.51%
Weighted cost proportions - Pencil: $41,400 / ($36,000 + $41,400) = 53.49%

Bismite Corporation Purchases Trees from Cheney Lumber and Processes Them