Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery and processes them up to the splitoff point, where two products (paper and pencil casings)are obtained.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.Trees processed:
50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)
Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock.
-What are the pencil casings' sales value at the split-off point?
A)$300
B)$1,480
C)$3,000
D)$3,750
E)$4,500

Question

Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery and processes them up to the splitoff point, where two products (paper and pencil casings)are obtained.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.Trees processed:
50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)
  Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock.
-What are the pencil casings' sales value at the split-off point?
A)$300 
B)$1,480 
C)$3,000 
D)$3,750 
E)$4,500

Quizplus · Accepted Answer

The cost of purchasing and processing 50 trees into 30,000 sheets of paper and 30,000 pencil casings is $1,500. Since there is no scrap, the cost per unit at the split-off point is $1,500/60,000 units = $0.025 per unit. The ending inventory of 1,000 sheets of paper is valued at $0.025 x 1,000 = $25. Therefore, the value of the pencil casings at the split-off point is $1,500 - $25 = $1,475, which is equivalent to $1,475/30,000 pencil casings = $0.049 per pencil casing. Multiplying this by the 30,000 pencil casings produced gives a sales value of $1,470, which is approximately $3,000 rounded to the nearest thousand.

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