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the solution of this exercise 16-27 Alternative methods of joint-cost allocation, product-mix decisions. The Southern Oil Company buys crude...
the solution of this exercise 16-27 Alternative methods of joint-cost allocation, product-mix decisions. The Southern Oil Companybuys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product Cis fully processed by the splitoff point. Products A, B, and D can individually be further refined into Super A,Super B, and Super D. In the most recent month (December), the output at the splitoff point was as follows: Product A, 322,400 gallons Product B, 119,600 gallons Product C, 52,000 gallons Product D, 26,000 gallonsThe joint costs of purchasing and processing the crude vegetable oil were $96,000. Southern had no beginning or ending inventories. Sales of product C in December were $24,000. Products A, B, and D were furtherrefined and then sold. Data related to December are as follows:Separable Processing Costs to Make Super Products RevenuesSuper A $249,600 $300,000Super B 102,400 160,000Super D 152,000 160,000Southern had the option of selling products A, B, and D at the splitoff point. This alternative would haveyielded the following revenues for the December production: Product A, $84,000 Product B, $72,000 Product D, $60,0001. Compute the gross-margin percentage for each product sold in December, using the following meth- Requiredods for allocating the $96,000 joint costs:a. Sales value at splitoffb. Physical-measurec. NRV2. Could Southern have increased its December operating income by making different decisions aboutthe further processing of products A, B, or D? Show the effect on operating income of any changesyou recommend.
