DD’s Linens produces terrycloth products
(Joint cost allocation; scrap) DD’s Linens produces terrycloth products for hotels. The company buys fabric in 60-inch-wide bolts. In the first process, the fabric is set up, cut, and separated into pieces. Setup can be for either robes and beach towels, or bath towels, hand towels, and washcloths.
During July, the company set up and cut 6,000 robes and 12,000 beach towels. Because of the irregular pattern of the robes, the process produces scrap that is sold to various prisons and hospitals for rags at $0.45 per pound. July production and cost data for DD’s Linens are as follows:
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Fabric used, 25,000 feet at $1.50 per foot
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$37,500
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Labor, joint process
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$12,000
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Overhead, joint process
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$11,000
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Pounds of scrap produced
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3,600
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DD’s Linens assigns the joint processing cost to the robes and beach towels based on approximated net realizable value at split-off. Other data gathered include these:
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Per Robe
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Per Beach Towel
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Final selling prices
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$20.00
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$7.00
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Costs after split-off
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6.80
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1.60
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The selling price of the scrap is treated as a reduction of joint cost.
a. Determine the joint cost to be allocated to the joint products for July.
b. How much joint cost is allocated to the robes in July? To the beach towels? Prepare the journal entry necessary at the split-off point.
c. What amount of cost for robes is transferred to Finished Goods Inventory for July? What amount of cost for beach towels is transferred to Finished Goods Inventory for July?
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Answers
Status NEW
Posted 27 Apr 2017 08:04 AM
My Price 5.00
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Attachments
file 1493281034-643957_1_636288073744714619_DD-LINENS-COST-WORKING-26-APRIL-2017.xlsx preview (188 words )
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