Question ID: CMA 1293 3.3 H2 (Topic: Byproducts)
- This topic has 1 reply, 2 voices, and was last updated 1 month, 4 weeks ago by Lynn Roden.
Hi, I would like to understand why no cost from the $93,000 is allocated to the by product.
I understand the difference between production vs sales method. We are using production method here where the cost for Morefeed is inventoried. My question is how do we know those inventory cost was already excluded from the $93K.
Atlas Foods produces the following three supplemental food products simultaneously through a refining process costing $93,000.
Alfa: 10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound.
Betters: 5,000 pounds of Betters, a flavoring material high in carbohydrates with a caloric value of 11,200 calories per pound.
Morefeed: 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound.
The joint products, Alfa and Betters, have a final selling price of $4 per pound and $10 per pound, respectively, after additional processing costs of $2 per pound of each product are incurred after the split-off point. Morefeed, a by-product, is sold at the split-off point for $3 per pound.
Assuming Atlas Foods inventories Morefeed, the by-product, the joint cost to be allocated to Betters using the weighted-quantity method based on caloric value per pound is
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