Douglas Company,a new firm,manufactures two products,J and K,in a common process.The joint costs amount to $80,000 per batch of finished goods.Each batch results in 20,000 liters of output,of which 80% are J and 20% are K.
The two products are processed beyond the split-off point,with Douglas incurring the following separable costs: J,$2 per liter;K,$5 per liter.After the additional processing,the selling price of J is $12 per liter,and the selling price of K is $15 per liter.
Required:
A.Determine the proper allocation of joint costs if the company uses the net-realizable-value method.
B.Assume that Douglas sold all of its production of K during the current accounting period.Compute K's sales revenue,cost of goods sold,and gross margin.
C.Is the firm's cost-of-goods-sold figure influenced by the choice of a joint-cost allocation method? Briefly explain.

C.Yes.Cost of goods sold is based on both separable costs and joint cost.The choice of an allocation method will influence the amount of joint cost charged to the product.

Question

Douglas Company,a new firm,manufactures two products,J and K,in a common process.The joint costs amount to $80,000 per batch of finished goods.Each batch results in 20,000 liters of output,of which 80% are J and 20% are K.
The two products are processed beyond the split-off point,with Douglas incurring the following separable costs: J,$2 per liter;K,$5 per liter.After the additional processing,the selling price of J is $12 per liter,and the selling price of K is $15 per liter.
Required:
A.Determine the proper allocation of joint costs if the company uses the net-realizable-value method.
B.Assume that Douglas sold all of its production of K during the current accounting period.Compute K's sales revenue,cost of goods sold,and gross margin.
C.Is the firm's cost-of-goods-sold figure influenced by the choice of a joint-cost allocation method? Briefly explain.
  
C.Yes.Cost of goods sold is based on both separable costs and joint cost.The choice of an allocation method will influence the amount of joint cost charged to the product.

Quizplus · Accepted Answer

The Answer of Douglas Company,a new firm,manufactures two products,J and K,in a common process.The joint costs amount to $80,000 per batch of finished goods.Each batch results in 20,000 liters of output,of which 80% are J and 20% are K.
The two products are processed beyond the split-off point,with Douglas incurring the following separable costs: J,$2 per liter;K,$5 per liter.After the additional processing,the selling price of J is $12 per liter,and the selling price of K is $15 per liter.
Required:
A.Determine the proper allocation of joint costs if the company uses the net-realizable-value method.
B.Assume that Douglas sold all of its production of K during the current accounting period.Compute K's sales revenue,cost of goods sold,and gross margin.
C.Is the firm's cost-of-goods-sold figure influenced by the choice of a joint-cost allocation method? Briefly explain.
  
C.Yes.Cost of goods sold is based on both separable costs and joint cost.The choice of an allocation method will influence the amount of joint cost charged to the product.

Douglas Company,a New Firm,manufactures Two Products,J and K,in a Common