# Question & Answer: SinclairSinclair Spirits Company produces two…..

The

SinclairSinclair

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Spirits Company produces two

productslong dash—turpentine

and methanol​ (wood

​alcohol)long dash—by

a joint process. Joint costs amount to

\$ 121 comma 000\$121,000

per batch of output. Each batch totals

11 comma 50011,500

​gallons: 25% methanol and​ 75% turpentine. Both products are processed further without gain or loss in volume. Separable processing costs are​ methanol,

\$ 2\$2

per​ gallon, and​ turpentine,

\$ 1\$1

per gallon. Methanol sells for

\$ 20\$20

per gallon. Turpentine sells for

\$ 15\$15

.

Requirement 1. How much of the joint costs per batch will be allocated to turpentine and to​ methanol, assuming that joint costs are allocated based on the number of gallons at splitoff​ point?

 Methanol Turpentine Total Physical measure of total production 2,875 8,625 11,500 Weighting 0.25000 0.75000 1.00000 Joint costs allocated \$30,250 \$90,750 \$121,000

Requirement 2. If joint costs are allocated on an NRV​ basis, how much of the joint costs will be allocated to turpentine and to​ methanol? ​(Round the weights to five decimal​ places.)

Methanol Turpentine Total
Final sales value of total production
Deduct separable costs 5750 8625
NRV at splitoff point
Weighting
Joint costs allocated

 1 How much of the joint costs per batch will be allocated to turpentine and to​methanol, assuming that joint costs are allocated based on the number of gallons at splitoff​ point? 2 If joint costs are allocated on an NRV​ basis, how much of the joint costs will be allocated to turpentine and to​ methanol? 3 Prepare​ product-line income statements per batch for requirement 1 and 2. Assume no beginning or ending inventories. 4 The company has discovered an additional process by which the methanol​(wood alcohol) can be made into a​ pleasant-tasting alcoholic beverage. The selling price of this beverage would be\$ 65\$65 a gallon. Additional processing would increase separable costs\$ 8\$8 per gallon​ (in addition to the\$ 2\$2 per gallon separable cost required to yield​ methanol). The company would have to pay excise taxes of​ 20% on the selling price of the beverage. Assuming no other changes in​ cost, what is the joint cost applicable to the wood alcohol​ (using the NRV​ method)? Should the company produce the alcoholic​ beverage? Show your computations. please show work