Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

b A second method that could be used in conjunction with a

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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1

Methanol Turpentine Total

b
A second method that could be used in conjunction with a is to have a stock holding charge. If managers buildup stock, they would be penalised. This would reduce incentives to use stock to manipulate reported income to meet target ratios.
6.20 Alternative
joint-cost-allocation
methods, further process decision.
(40 min) A diagram of the situation is in Solution Exhibit 6.20.
1
Methanol Turpentine Total

Physical measure of production (litres)
2,500 7,500 10,000 Weighting
2,500 10,000
= 0.25 7,500 10,000
= 0.75 Joint costs allocated,
MT
2
Methanol Turpentine
Total
Expected final sales value of production,
MT Deduct expected separable costs to complete and sell,
MT Estimated net realisable value at split-off point
€45,000
€90,000
€135,000 Weighting
,
,
€45 000
€135 000
=
3 1
,
,
€90 000
€135 000
=
3 2

3 Joint costs allocated, MT

Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012

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