(Sell or process further) Midwest Clothing produces three products (precut fabrics for hats, shirts, and pants) from a joint process. Joint cost is allocated on the basis of relative sales value at split off. Rather than sell the products at split off, the company has the option to complete each of the products. Information related to these products is shown below:
|
Hats |
Shirts |
Pants |
Total |
|
|
Number of units produced |
5,000 |
8,000 |
3,000 |
16,000 |
|
Joint cost allocated |
$87,000 |
? |
? |
$180,000 |
|
Sales values at split off point |
? |
? |
$40,000 |
$300,000 |
|
Additional costs of processing further |
$13,000 |
$10,000 |
$39,000 |
$62,000 |
|
Sales values after all processing |
150,000 |
$134,000 |
$105,000 |
$389,000 |
a. What amount of joint cost should be allocated to the Shirts and Pants products?
b. What are the sales values at split off for Hats and Shirts?
c. Which products should be processed further? Show computations.
d. If 4,000 Shirts are processed further and sold for $67,000, what is gross profit on the sale?