The Chocolate Factory manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate products: Chocolate-powder liquor base and Milk-chocolate liquor base. These two intermediate products become separately identifiable at a single split off point. Every 1,500 pounds of cocoa beans yields 60 gallons of chocolate-powder liquor base and 90 gallons of milk-chocolate liquor base.
The chocolate-powder liquor base is further processed into chocolate powder. Every 60 gallons of chocolate-powder liquor base yield 600 pounds of chocolate powder. The milk-chocolate liquor base is further processed into milk chocolate. Every 90 gallons of mil-chocolate liquor base yield 1,020 pounds of milk chocolate.
Production and sales data for August 2009 are (assume no beginning inventory):
- Cocoa beans processed, 15,000 pounds
- Costs of processing cocoa beans to split off point (including purchase of beans), $30,000
(Please see attached)
Chocolate Factory fully processes both of its intermediate products into chocolate powder or milk chocolate. There is an active market for these intermediate products. In August 2009, Chocolate Factory could have sold the chocolate-powder liquor base for $21 a gallon and the mil-chocolate liquor base for $26 a gallon.
Answer the following:
1. Calculate how the joint costs of $30,000 would be allocated between chocolate powder and milk chocolate under the following methods:
a. Sales value at split off
b. Physical-measure (gallons)
d. Constant gross-margin percentage NRV
2. What are the gross-margin percentages of chocolate powder and milk chocolate under each of the methods in requirement 1?
3. Could Chocolate Factory have increased its operating income by a change in its decion to fully process both of its intermediate products? Show your computations.© BrainMass Inc. brainmass.com September 22, 2018, 3:09 pm ad1c9bdddf - https://brainmass.com/business/management-accounting/comparison-alternative-joint-cost-allocation-methods-402936
A comparison of alternative Joint-Cost-Allocation methods are examined.