A Company Puts Four Products Through a Common Production Process

question 89

Essay

A company puts four products through a common production process. This process costs $100,000 each year. The four products can be sold when they emerge from this process at the "split-off point," or processed further and then sold. Data about the four products for the coming period are:
$\begin{array}{|c|c|r|r|r|}\hline &&\text { Unit Sales } & \text { Unit Sales } & \\&&\text { Price per unit } & \text { Price per unit } & \text { Additional }\\&&\text { at Split-Off } &\text { after Further }&\text {Processing }\\\underline{\text { Product }} &\underline{ \text { Volume }} &\underline{ \text { Point } }& \underline{\text { Processing }} &\underline{ \text { Costs }}\\\hline \text { Stroller } & 20,000 \mathrm{lb} & \$ 28.00 & \$ 42.00 & \$ 400,000 \\\hline \text { Walker } & 10,0001 \mathrm{lb} & 7.00 & 28.00 & 144,000 \\\hline \text { Jogger } & 5,000 \mathrm{lb} & 36.00 & 58.00 & 120,000 \\\hline \text { Runner } & 5,000 \mathrm{lb} & 18.00 & 22.00 & 40,000 \\\hline\end{array}$ Determine which products should be sold at the split-off point and which should be processed further.

Understand how to adjust the investment account balance for changes in ownership percentage, including acquisition costs, fair value adjustments, and amortization of excess cost over book value.

Understand the accounting for sales of investment in shares under the equity method, including gain/loss calculation and adjustments to the investment account.

Comprehend how a company's share of cumulative losses affects accounting for its investment under the equity method.

Understand and apply the equity method for accounting investments.

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Definitions:

Somatic Nervous Systems

A part of the peripheral nervous system involved in voluntary control of body movements through the action of skeletal muscles.

Glial Cells

Non-neuronal cells in the central and peripheral nervous system that support, protect, and provide a supportive framework for neurons.

Axons

Long, threadlike parts of nerve cells which transmit electrical impulses away from the neuron's cell body.

Myelin

A fatty substance that surrounds and insulates the axons of nerve cells, speeding up the transmission of electrical signals in the nervous system.