Yakima Manufacturing purchases trees from Cheney Lumber 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 May: The cost of purchasing 100 trees and processing them up to the splitoff point to yield 70,000 sheets of paper and 60,000 pencil casings is $3,000.
Yakima's Manufacturing's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper.
What are the paper's and the pencils' approximate weighted cost proportions using the sales value at splitoff method, respectively?
A)50.00% and 50.00%
B)33.33% and 66.67%
C)31.82% and 68.18%
D)None of these answers is correct.

Question

Yakima Manufacturing purchases trees from Cheney Lumber 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 May:    The cost of purchasing 100 trees and processing them up to the splitoff point to yield 70,000 sheets of paper and 60,000 pencil casings is $3,000.
Yakima's Manufacturing's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper.
What are the paper's and the pencils' approximate weighted cost proportions using the sales value at splitoff method, respectively?
A)50.00% and 50.00% 
B)33.33% and 66.67% 
C)31.82% and 68.18% 
D)None of these answers is correct.

Quizplus · Accepted Answer

To use the sales value at splitoff method, we need to calculate the total sales value of both products at splitoff point.

Total sales value at splitoff point =
(70,000 sheets of paper - 2,000 sheets of ending inventory) x $0.04 per sheet +
60,000 pencil casings x $0.05 per casing = $2,800

Paper's approximate weighted cost proportion =
[(68,000 sheets of paper / 130,000 total units) x $3,000] / $2,800 = 31.82%

Pencil's approximate weighted cost proportion = 
[(62,000 pencil casings / 130,000 total units) x $3,000] / $2,800 = 68.18%

Therefore, the answer is C.

Yakima Manufacturing Purchases Trees from Cheney Lumber and Processes Them