prepare a process diagram 643914
Circle City Inc. produces two joint products—JP#89 43 A and JP#89 43 B—from a single input. Further processing of product JP#89 43 A results in a by product designated BP#89 43 X. A summary of production and sales for 2010 follows.
- Circle City Inc. input 600,000 pounds of raw material into the Processing Department. Total joint processing cost was $520,000. During the joint processing, 90,000 pounds of material were lost.
- After joint processing, 60 percent of the joint process output was transferred to Division 1 to produce JP#89 43 A, and 40 percent of the joint process output was transferred to Division 2 to produce JP#89 43 B.
- Further processing in Division 1 resulted in 70 percent of the input pounds becoming JP#89 43 A and 30 percent of the input pounds becoming BP#89 43 X. The separate processing cost for JP#89 43 A in Division 1 was $649,026.
- Total packaging costs for JP#89 43 A were $122,094. After Division 1 processing and packaging, product JP#89 43 A is salable at $8.00 per pound.
- Each pound of BP#89 43 X can be sold for $0.25 after incurring total selling cost of $5,000. The company accounts for the by product using the net realizable value method and showing the NRV as a reduction in the cost of goods sold of the joint products.
- In Division 2, product JP#89 43 B was further processed at a separate cost of $387,600. A completed pound of JP#89 43 B sells for $3.70.
- Selling cost for product JP#89 43 A is $0.80 per pound and for product JP#89 43 B is $0.15 per pound.
a. Prepare a process diagram.
b. Record the journal entry to
1. recognize incurrence of joint cost.
2. allocate joint costs to the joint products using pounds as a physical measure and transfer the products into Divisions 1 and 2.
3. record incurrence of separate processing costs for products JP#89 43 A and JP#89 43 B in Divisions 1 and 2.
4. record incurrence of packaging cost for product JP#89 43 A.
5. transfer completed products JP#89 43 A and JP#89 43 B to finished goods.
c. Allocate the joint cost to products JP#89 43 A and JP#89 43 B using approximated net realizable values at split off. (Round proportions to nearest whole percentage.)
d. Circle City Inc. had no Work in Process or Finished Goods Inventory at the beginning of 2010. Prepare an income statement through gross margin for Circle City Inc. assuming that
- 80 percent of product JP#89 43 A and 90 percent of product JP#89 43 B produced were sold.
- all the by product BP#89 43 X that was produced during the year was sold.
- joint cost was allocated using the physical measurement method in (b).