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15-33 Joint-cost allocation. SW Flour Company buys 1 input of standard flour and refines it...

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Accounting

15-33 Joint-cost allocation. SW Flour Company buys 1 input of standard flour and refines it using a special sifting process to 3 cups of baking flour and 9 cups of bread flour. In May 2017, SW bought 12,000 inputs of flour for $89,000. SW spent another $47,800 on the special sifting process.

The baking flour can be sold for $3.60 per cup and the bread flour for $4.80 per cup. SW puts the baking flour through a second process so it is super fine. This costs an additional Sl.OO per cup of baking flour and the process yields 1/2 cup of super-fine baking flour for every one cup of baking flour used. The super-fine baking flour sells for $9.60 per cup.

Required

1. Allocate the $136,800 joint cost to the super fine baking flour and the bread flour using the following:

a. Physical-measure method (using cups} of jointcost allocation

b. Sales value at the split-off method of joint-cost allocation

c. NRV method of jointcost allocation

d. Constant gross-margin percentage NRV method of joint-cost allocation

2. Each of these measures has advantages and disadvantages; what are they?

3. Some claim that the sales value at the split-off method is the best method to use. Discuss the logic behind this claim.

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