# 76 9. Part 2: Exercises and problems – new problems created by Rob Zatulsky, Fall 2022.

### Question 1

Saltarelli’s Creamery turns raw milk into two products: cream and skim milk. Both of these products can be sold as is or processed further and sold for a higher price. Their weekly output is 7,000 litres of cream and 5,000 litres of skim milk. These joint costs total \$12,500. Cream is sold for \$5/litre and skim milk is sold for \$3/litre.

Allocate joint costs to each product using the physical quantities method (litres), and calculate the profit or loss for each product.

### Question 2

Brittany owns a geothermal greenhouse that produces tomatoes and cucumbers. In July, Brittany accumulated \$1,000 in joint costs between the two vegetables. The greenhouse produced 400 pounds of tomatoes and 355 pounds of cucumbers in that time. Brittany can sell the tomatoes for \$2.25 per pound and the cucumbers for \$1.75 per pound.

Allocate joint costs to each product using the physical quantities method (pounds), and calculate the profit or loss for each product.

### Question 3

Jasmine owns a cat food processing plant that produces salmon pate and turkey pate. In March, Jasmine accumulated \$125,000 in joint costs between the two types of cat food. The plant produced 4,500 cases of salmon pate and 7,200 cases of turkey pate in that time. Jasmine can sell the Salmon pate for \$22.25 per case and the turkey pate for \$19.40 per case.

Allocate joint costs to each product using the physical quantities method (cases), and calculate the profit or loss for each product.

### Question 4

Brian Wilson owns a company that produces special sand for sandboxes. In September, Brian accumulated \$2,345,540 in joint costs between the two types of sand, coarse and fine. His company produced 1,765 tonnes of coarse sand and 5,675 tonnes of fine sand in that time. Mr. Wilson can sell the coarse sand for \$125 per tonne and the fine sand for \$425 per tonne to Mike Love Industries.

Allocate joint costs to each product using the physical quantities method, and calculate the profit or loss for each product.

### Question 1

Saltarelli’s Creamery turns raw milk into two products: cream and skim milk. Both of these products can be sold as is or processed further and sold for a higher price. Their weekly output is 10,000 litres of cream and 15,000 litres of skim milk. These joint costs total \$60,000. Cream is sold for \$3.00/litre and skim milk is sold for \$2.25/litre.

Allocate joint costs to each product using the relative sales value method, and calculate the profit or loss for each product.

### Question 2

Brittany owns a geothermal greenhouse that produces tomatoes and cucumbers. In July, Brittany accumulated \$1,500 in joint costs between the two vegetables. The greenhouse produced 1,025 pounds of tomatoes and 576 pounds of cucumbers in that time. Brittany can sell the tomatoes for \$1.75/pound and the cucumbers for \$0.50 per pound.

Allocate joint costs to each product using the relative sales value method, and calculate the profit or loss for each product.

### Question 3

Jasmine owns a cat food processing plant that produces salmon pate and turkey pate. In February, Jasmine accumulated \$75,000 in joint costs between the two types of cat food. The plant produced 5,400 cases of salmon pate and 2,700 cases of turkey pate in that time. Jasmine can sell the Salmon pate for \$11.75 per case and the turkey pate for \$11.50 per case.

Allocate joint costs to each product using the relative sales value method, and calculate the profit or loss for each product.

### Question 4

Brian Wilson owns a company that produces special sand for sandboxes. In July, Brian accumulated \$2,867,450 in joint costs between the two types of sand, coarse and fine. His company produced 1,777 tonnes of coarse sand and 222 tonnes of fine sand in that time. Mr. Wilson can sell the coarse sand for \$475 per tonne and the fine sand for \$525 per tonne to Mike Love Industries.

Allocate joint costs to each product using the relative sales value method, and calculate the profit or loss for each product.

### Question 1

Brittany grows pear trees and cherry trees in containers for its customers. This past year, her company grew 5,000 pear trees and 3,000 cherry trees at a cost of \$100,000. Brittany can sell pear trees for \$15 each and cherry trees for \$12 each.

Assume cherry trees have no market at split off. They are too fragile to survive at that stage. But they have a market if they are allowed to grow for a few months. The additional processing cost is \$4 per tree, and customers are willing to pay \$18 for the larger trees.

Allocate joint costs using the net realizable value method. Calculate the profit or loss for each product.

### Question 2

John has a fleet of fishing boats. The most recent outing cost \$100,000 and yielded 25,000 pounds of trout and 16,000 pounds of pike. John can sell trout for \$2.50 per pound and pike for \$4.00 per pound.

Assume trout can be processed further into smoked trout for an additional \$2.50 per pound. Customers are willing to pay \$7.00 per pound for smoked trout. Should John process the trout further? Explain.

Allocate the joint costs using the net realizable value method.

### Question 3

Diamond Al’s Table Tops makes generic table tops in two different matte colours: black and yellow. The most recent output cost \$1,690,000 and yielded 25,000 black table tops and 75,000 matte yellow. Diamond Al can sell the black table tops for \$133 each and the yellow ones for \$75 each.

Assume the matte yellow table tops can be processed further into glossy canary yellow table top for an additional \$33 per table top. Customers are willing to pay \$144 per canary yellow table top.

Allocate the joint costs using the net realizable value method.

### Question 4

Danielle and Dani had the entrepreneurial spirit and decided to go into business making chairs. Their company, Dee Squared, makes two types of armless chairs: one out of mahogany and one out of walnut. The joints costs of their last batch produced were \$286,765. The output was comprised of 2,275 mahogany chairs and 1,761 walnut chairs. Mahogany chairs could be sold for \$300 each while the walnut chairs retail for \$275.

Danielle came up with the idea to add arm rests to walnut chairs. It would cost \$25 each chair to process further, but the retail price would change to \$319 per chair.

Allocate the joint costs using the net realizable value method.

### Question 1

Brittany grows pear trees and cherry trees in containers for its customers. This past year, her company grew 9,000 pear trees and 6,555 cherry trees at a cost of \$45,000. Brittany can sell pear trees for \$19 each and cherry trees for \$15 each.

Allocate joint costs using the constant gross margin method.

### Question 2

John has a fleet of fishing boats. The most recent outing cost \$99,032 and yielded 14,000 pounds of trout and 37,000 pounds of pike. John can sell trout for \$3.50 per pound and pike for \$6.00 per pound.

Assume trout can be processed further into smoked trout for an additional \$2.25 per pound. Customers are willing to pay \$8.00 per pound for smoked trout.

Allocate joint costs using the constant gross margin method.

### Question 3

Diamond Al’s Table Tops makes generic table tops in two different matte colours: green and purple . The most recent output cost \$700,000 and yielded 25,000 matte green table tops and 35,000 matte purple. Diamond Al can sell the green table tops for \$75 each and the purple ones for \$71 each.

Assume the matte green table tops can be processed further into glossy emerald green table top for an additional \$25 per table top. Customers are willing to pay \$100 per emerald green table top.

Allocate joint costs using the constant gross margin method.

### Question 4

Danielle and Dani had the entrepreneurial spirit and decided to go into business making chairs. Their company, Dee Squared, makes two types of armless chairs, one out of mahogany and one out of walnut. The joints costs of their last batch produced were \$863,260. The output was comprised of 4,774 mahogany chairs and 987 walnut chairs. Mahogany chairs could be sold for \$277 each while the walnut chairs retail for \$265.

Danielle came up with the idea to add arm rests to walnut chairs. It would cost \$37.33 each chair to process further but the retail price would change to \$349 per chair.

Allocate joint costs using the constant gross margin method.