Douglas Company, a New Firm, Manufactures Two Products, J and K

question 32

Essay

Douglas Company, a new firm, manufactures two products, J and K, in a common process. The joint costs amount to $80,000 per batch of finished goods. Each batch results in 20,000 liters of output, of which 80% are J and 20% are K.
The two products are processed beyond the split-off point, with Douglas incurring the following separable costs: J, $2 per liter; K, $5 per liter. After the additional processing, the selling price of J is $12 per liter, and the selling price of K is $15 per liter.
Required:
A. Allocate the joint costs assuming the company uses the net-realizable-value method.
B. Assume that Douglas sold all of its production of K during the current accounting period. Compute K's sales revenue, cost of goods sold, and gross margin.
C. Is the firm's cost-of-goods-sold figure influenced by the choice of a joint-cost allocation method? Briefly explain.

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Definitions:

Cold War

A period of geopolitical tension between the Soviet Union and the United States and their respective allies, post-World War II until the dissolution of the Soviet Union in 1991, characterized by propaganda, espionage, and proxy wars.

United States And Russia

Two potent global actors, their relationship spans complex interactions including strategic competition, historical Cold War rivalry, and periods of diplomatic cooperation.

Truman Doctrine

A U.S. foreign policy established in 1947 by President Harry S. Truman, declaring support for countries resisting communism and Soviet expansion.

Concept Of Containment

A geopolitical strategy aimed at preventing the expansion of an enemy, notably used during the Cold War to limit the spread of communism.