Solved: DD s Linens produces terrycloth products for

hotels The company

DD s Linens produces terrycloth products for hotels The company

DD’s Linens produces terrycloth products for hotels. The company buys fabric in 60-inch-wide
bolts. In the first process, the fabric is set up, cut, and separated into pieces. Setup can be for
either robes and beach towels, or bath towels, hand towels, and washcloths.
During July, the company set up and cut 6,000 robes and 12,000 beach towels. Because of the
irregular pattern of the robes, the process produces scrap that is sold to various prisons and
hospitals for rags at $0.45 per pound. July production and cost data for DD’s Linens are as
follows:
Fabric used, 25,000 feet at $1.50 per foot ...... $37,500
Labor, joint process ................. $12,000
Overhead, joint process .............. $11,000
Pounds of scrap produced ............. 3,600
DD’s Linens assigns the joint processing cost to the robes and beach towels based on
approximated net realizable value at split-off. Other data gathered include these:

The selling price of the scrap is treated as a reduction of joint cost.

a. Determine the joint cost to be allocated to the joint products for July.
b. How much joint cost is allocated to the robes in July? To the beach towels? Prepare the
journal entry necessary at the split-off point.
c. What amount of cost for robes is transferred to Finished Goods Inventory for July? What
amount of cost for beach towels is transferred to Finished Goods Inventory forJuly?

DD s Linens produces terrycloth products for hotels The company

ANSWER
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