Question

52.Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows:
  

				Proportion of Services Used by:
Department	Direct costs			S1		S2		P1		P2
S1	$	148,000				0.70		0.10		0.20
S2	$	179,000		0.20				0.30		0.50
P1	$	209,000
P2	$	148,000

Under the direct-method of cost allocation, the amount of S1 costs allocated to P1 would be:

$49,333.

$150,500.

$59,333.

$14,800.

53. Given the following information for Camping Division:

Selling price to outside customers	$	50
Variable cost per unit	$	32
Total fixed costs	$	507,000
Capacity in units		39,000

The Lantern Division would like to purchase internally from the Camping Division. The Lantern Division now purchases 6,600 units each period from outside suppliers at $48 per unit. The Camping Division has ample excess capacity to handle all of the Lantern Division's needs. What is the lowest price that Camping Division could accept?

$32.

$48.

$45.

$50.

54.Products X, Y, and Z are produced from the same process at a cost of $7,500. Five thousand pounds of raw material yields 3,500 X, 4,500 Y, and 3,000 Z. Selling prices are: X $2 per unit, Y $4 per unit, Z valueless. The ending inventory of X is 90 units. What is the value of the ending inventory if joint costs are allocated using net realizable value?

$35.67.

$45.20.

$54.00.

$56.00.

Answer 1

Answers are as follow:

52. $14800 i.e $148000*10% = $14800

53. $32, Since the Camping Division has ample excess capacity to handle all of the Lantern Division's needs and anyway it is incurring the fixed cost at now also. Therefore the minimum price that can be accepted will be equal to marginal cost i.e. $32 per unit.

54. Answer is $ 54.

Net realizable value of X = $2*3500 = $7000

Y =$4*4500 = $18000

Z = Nil

Total X, Y and Realization = $25000

Allocation of joint cost in the ration of realizable value

Joint cost per unit = ($7500/$25000) = $0.3

Ending inventory value of X = $0.3*90 = $54