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

per gallon.Read the requirements

LOADING…

.

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

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