Question

Bismite Corporation 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 October Trees processed: 250 trees Production paper 180,000 sheets pencil casings 180,000 Sales: paper 174,000 at $0.12 per page pencil casings 178,500 at $0.15 per casing The cost of purchasing 250 trees and processing them up to the splitoff point to yield 180,000 sheets of paper and 180.000 pencil casings is $12.500. Bismite's accounting department reported no beginning inventory a) What is the total sales value at the split off point for paper? $ bf the sales value at splitoft method is used, what are the approdate costs a nd to ending inventory for paper

Answer 1

1) Total sales value at the splitoff point for paper= Papers produced*Selling price per page

= 180000*$0.12= $21600

2) Ending inventory of Paper= 180000-174000= 6000

Paper= 180000*$0.12= $21600

Pencil casings= 180000*$0.15= $27000

Total= $21600+27000= $48600

Weighted average proportion of Paper= $21600*100/48600= 44.44%

Joint costs assigned to ending inventory for Paper= (Cost of purchasing*Ending inventory of Paper*Weighted average proportion of Paper)/Total units produced of Paper

= $(12500*6000*44.44%)/180000

= $185.17