Question

Company produces three products: Product A, Product B, and Product C.

           During the year the joint costs of processing the three products were $400,000. Production and sales value information were as follows:

                                             Sales Value

Product               Units         at Split-Off        Separable Costs       Selling Price

A                       400,000      $20 per unit           $ 20 per unit           $40 per unit

B                       400,000       $18 per unit           $ 15 per unit           $28 per unit

C                       800,000      $12 per unit           $14 per unit            $17 per unit

a.   Allocate the joint costs using the physical output method.

b.   Allocate the joint costs using the net realizable value method.

c. Allocate the joint costs using sales value at split-off point method.

CLEAR TABLES_PHOTOS NOT ALLOWED

Answer 1

	a.   Allocate the joint costs using the physical output method.
		Product	Output units	Weight	Joint Cost
		a	b	c=b/1600000	d=c*400000
		A	400000	0.25	$            1,00,000
		B	400000	0.25	$            1,00,000
		C	800000	0.5	$            2,00,000
		Total	1600000	1	$            4,00,000
	b.   Allocate the joint costs using the net realizable value method.
		Product	Output units	Selling Price	Separable Costs	Net Realisable Value	Weight	Joint Cost
		a	b	c	d	e=(c-d)*b	f=e/15600000	g=f*4000000
		A	400000	$                                     40	20	$                        80,00,000	0.513	$       2,05,128
		B	400000	28	15	5200000	0.333	$       1,33,333
		C	800000	17	14	2400000	0.154	$           61,538
		Total	1600000			15600000		$       4,00,000
	c. Allocate the joint costs using sales value at split-off point method.
		Product	Output units	Sale Price At Split off	Sale Value	Weight	Joint Cost
		a	b	c	d=c*b	e=d/24800000	f=e*400000
		A	400000	20	$          80,00,000	0.323	$                    1,29,032
		B	400000	18	$          72,00,000	0.290	$                    1,16,129
		C	800000	12	$          96,00,000	0.387	$                    1,54,839
		Total	1600000		$      2,48,00,000	1	$                    4,00,000