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



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
Solution Exhibit 6.20
[AQ6]



Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
6.21
Alternative methods of joint-cost allocation, product-mix decisions.
(40 min) A diagram of the situation is in Solution Exhibit 6.21.
1
Calculation of joint-cost allocation proportions
a
Sales value Allocation of €100,000 at split-off Proportions joint costs
ABC D
70,000 70/200 = 0.35 35,000
€200,000

1.00
€100,000
b
Allocation of €100,000 Physical measure(litres) Proportions joint Costs
ABC D

50,000

50/500 = 0.10 10,000

500,000

1.00
€100,000
c

Final sales value Separable costs Estimated net realisable value Proportions Allocation of €100,000 joint costs ABC 50,000 50/200 = 0.25 25,000 D
120,000 90,000 30,000 30/200 = 0.15 15,000

€200,000 1.00
€100,000 Calculation of gross-margin percentages
a
Sales value at split-off method
Super A Super B Super C Super D Total Sales
€300,000
€100,000
€50,000
€120,000
€570,000 Joint costs
25,000 15,000 25,000 35,000 100,000 Separable costs
200,000 80,000 0
90,000 370,000
Total costs
225,000 95,000 25,000 125,000 470,000 Gross margin
€75,000
€5,000
€25,000
€(5,000)
€100,000
Gross-margin percentage
25%
5%
50%
(4.17%)
17.54%


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

Super A Super B Super C
Super D Total Sales
€300,000 €100,000 €50,000 €120,000 €570,000 Joint costs
60,000 20,000 10,000 10,000 100,000 Separable costs
200,000 80,000 0
90,000 370,000
Total costs
260,000 100,000 10,000 100,000 470,000 Gross margin
€40,000
€ 0 €40,000 €20,000 €100,000
Gross-margin percentage
13.33%
0%
80%
16.67%
17.54%
c
Estimated net realisable value method

Super A
Super B Super C
Super D Total Sales
€300,000
€100,000
€50,000
€120,000 Joint costs
50,000 10,000 25,000 15,000 Separable costs
200,000 80,000 0
90,000 370,000
Total costs
250,000 90,000 25,000 105,000 Gross margin
€50,000
€10,000
€25,000
€15,000
€100,000



Gross-margin percentage
16.67%
10%
50%
12.5%
Summary of gross-margin percentages

Joint cost allocation method
Super A Super B Super C
Super D

Sales value at split-off
25.00%
5%
50%
(4.17%) Physical measure
13.33%
0%
80%
16.67% Estimated net realisable value
16.67%
10%
50%
12.50%
2
Further processing of A into Super A Incremental revenue, €300,000 −
€50,000
€250,000
Incremental costs

200,000 Incremental operating income from further processing

€50,000 Further Processing of B into Super B Incremental revenue, €100,000 − €30,000

€70,000
Incremental costs


80,000 Incremental operating income from further processing

(€10,000) Further Processing of D into Super D Incremental revenue, €120,000 −
€70,000

€50,000
Incremental costs


90,000 Incremental operating income from further processing

€(40,000) Operating income can be increased by €50,000 if both Band Dare sold at their split-off point.


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

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