Bismite Corporation purchases trees from Cheney lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of October: 250 trees paper pencil casings paper pencil casings Trees processed: Production: 500,000 sheets 250,000 400,000 at $0.10 per page 250,000 at $0.20 per casing Sales The cost of purchasing 250 trees and processing them up to the splitoff point to yield 500,000 sheets of paper and 250,000 pencil casings is $20,000. Bismite's accounting department reported no beginning inventory a) What is the total sales value at the splitoff point for paper? b) What is the total sales value at the splitoff point of the pencil casings? d) If the sales value at splitoff method is used, what is the approximate production cost for each pencil casing? e) If the sales value at splitoff method is used, what is the approximate production cost for each paper sheet? f) If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper?

Answer are as follow:

A: $50,000.

B: $50,000.

D: $0.04.

E: $0.02

F: $2,000.

Explanation:

A.total sale value at split off point for paper = paper produced * sale price per page

=>500,000 * $0.10

=>$50,000.

b.total sale value at splitoff point for pencil casings =250,000*$0.20

=>$50,000.

d) approximate production cost for all pencil casings:

total cost till split off point *[ (sale value of pencil casing) /(sale value of pencil casing + sale value of paper)]

=>$20,000 * [$50,000 / ($50,000+50,000)]

=>$20,000*[1/2]

=>$10,000

$10,000is cost of 250,000 pencil casings.

=>cost for each pencil casing = $10,000 / 250,000

=>$0.04.

e.) first let us know the production cost for all paper sheet:

=> total cost [ sale value of paper sheet / (sale value of paper sheet)+(sale value of pencil casing)]

=>$20,000 *[50,000 / (50,000+50,000)]

=>$10,000.for 500,000 sheets of paper

=>$10,000 / 500,000 =>$0.02 per sheet of paper

f.) value = paper in ending inventory *cost per sheet

=>(500,000 - 400,000) paper sheets *$0.02

=>100,000 paper sheets *$0.02

=>$2,000.

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