Question

The following information applies to the questions displayed below.] Breakfasttime Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows: Joint Cost Cereal Quantity at Split-Off Point Sales Price per Kilogram $ 98,000 Yummies 12,800 kilograms $ 6.80 Crummies 8,800 kilograms 8.30 Breakfasttime Cereal Company has an opportunity to process its Crummies further into a mulch for ornamental shrubs. The additional processing operation costs $2.30 per kilogram, and the mulch will sell for $14.50 per kilogram.

2.	Suppose the company does process Crummies into the mulch. Use the net-realizable-value method to allocate the joint production cost between the mulch and the Yummies. (Round your calculation of relative proportions to 3 decimal places.)

Answer 1

net realisable value of Yummies (12,800*6.80)	87,040
net realisable value of crummies (8800 kgs *(14.50-2.30))	107,360
total of net realisable value	194,400

allocation of joint production cost:

to yummies = $98,000* (87,040/194,400)=>$98,000*0.448 =>$43,904.

to crummies or mulch= $98,000* (107,360/194,400)=>$98,000*0.552=>$54,096.