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    Joint Costs for Skanda Corporation

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    Skanda Corporation manufactures two chemicals (Flextra and Hydro) in a joint process. Data from a recent month follow.
    Direct materials used $360,000
    Direct labor $150,000
    Manufacturing overhead $690,000
    Manufacturing output:
    Flextra 40,000 gallons
    Hydro 120,000 gallons
    Flextra sells for $15 per gallon and Hydro sells for $20 per gallon.
    1. Compute the total joint costs to be allocated.
    2. Compute the joint costs that would be allocated to Flextra by using the physical-units method.
    3. Compute the joint costs that would be allocated to Hydro by using the relative-sales-value method.
    4. Assume that Hydro can be converted into a more refined product, Hydro-R, in a totally separable process at an additional cost of $4 per gallon. If the refined product can be sold in the marketplace for $26 per gallon, should Skanda process do the additional processing? Briefly explain.

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    Solution Summary

    The expert examines a joint costs for Skanda Corporation. The total joint costs are determined.