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


ab Physical measure (litres) method Methanol Turpentine



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
3 ab Physical measure (litres) method
Methanol Turpentine
Total

Sales €52,500
€105,000
€157,500 Cost of goods sold
Joint costs
30,000 90,000 120,000
Separable costs
7,500 15,000 22,500
Total costs
37,500 105,000 142,500 Gross margin
€15,000
€ 0
€15,000
b
Estimated net realisable value method
Methanol Turpentine
Total

Sales €52,500 €105,000 €157,500 Cost of goods sold
Joint costs
40,000 80,000 120,000
Separable costs
7,500 15,000 22,500
Total costs
47,500 95,000 142,500 Gross margin
€5,000 €10,000
€15,000
4
Wood Alcohol Turpentine Total

Wood alcohol
Turpentine
Total
Expected final sales value of production, WA, 2,500 × €60.00;
T, 7,500 × €14.00
€150,000
€105,000
€255,000 Deduct expected separable costs to complete and sell,
WA, 2,500 × €12.00 +
0.20 × €150,000;
T, 7,500 × €2.00 60,000 15,000 75,000 Estimated net realisable value at split-off point
€90,000 €90,000 €180,000 Weighting
,
,
€ 90 000
€ 180 000
= 0.5
,
,
€90 000
€180 000
= 0.5 1.0 Joint costs allocated,
WA, 0.5 × €120,000; T, 0.5 × €120,000
€60,000 €60,000 €120,000


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 An incremental approach demonstrates that the company should use the new process
Incremental revenue,

(€60.00
− €21.00) × 2,500


€97,500
Incremental costs

Added processing, €9.00 × 2,500
€22,500

Taxes, (0.20 × €60.00) × 2,500 30,000 52,500
Incremental operating income from
further processing

€45,000
Proof Total sales of both products

€255,000
Joint costs

120,000
Separable costs

75,000
Cost of goods sold

195,000
New gross margin


60,000
Old gross margin


15,000
Difference in gross margin

€45,000

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