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 310 trees and processing them up to the split-off point to yield 190,000 sheets of paper and 190,000 pencil casings is $13,500.
Bismite's accounting department reported no beginning inventory.
If the sales value at split-off method is used, what are the approximate joint costs assigned to ending inventory for paper? (Round intermediary percentages to the nearest hundredth.)
A) $355.29
B) $29.61
C) $497.34
D) $379.24

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 310 trees and processing them up to the split-off point to yield 190,000 sheets of paper and 190,000 pencil casings is $13,500.
Bismite's accounting department reported no beginning inventory.
If the sales value at split-off method is used, what are the approximate joint costs assigned to ending inventory for paper? (Round intermediary percentages to the nearest hundredth.)
A) $355.29 
B) $29.61 
C) $497.34 
D) $379.24

Quizplus · Accepted Answer

Paper: 190,000 sheets × $0.10 = $19,000
Pencils: 190,000 casings × $0.14 = $26,600
Weighted cost proportions - Paper: $19,000 / ($19,000 + $26,600) = 41.67%
Ending inventory = 190,000 - 178,000 = 12,000 sheets
Joint costs assigned to ending inventory for paper = 41.67% × $13,500 × (12,000 / 190,000) = $355.29

Bismite Corporation Purchases Trees from Cheney Lumber and Processes Them