Question

ABC Company produces three products in a joint production process. At the split-off point, all three products are produced further and then sold. Information about these products for 2019, the most recent year, appears below: Product A Product B Product C Units produced ............... 15,000 25,000 10,000 Selling price ................ $50 per unit $40 per unit $75 per unit Additional processing costs .. $15 per unit $16 per unit $37.50 per unit Joint costs for 2019 totaled $150,000. During 2019, ABC Company sold 12,000 units of Product A; 11,000 units of Product B were sold; and 9,000 units of Product C were sold. Assume there were no beginning inventories of any type in 2019. ABC Company uses the constant gross margin method to allocate joint costs to products. Calculate the amount of joint costs allocated to Product C. If your answer is negative, put a minus sign in front of your answer with no spaces in between (i.e., -100).

Answer 1

2 Methods are given, METHOD 1:- WHERE UNITS FOR BOTH SALE AND ADDITIONAL PROCESSING TAKEN SAME and METHOD 2:- WHERE UNITS FOR BOTH SALE AND ADDITIONAL PROCESSING TAKEN DIFFERENT AS PER SALE AND PRODUCED

Products	A	B	C
Units Produced (A)	15,000	25,000	10,000
Selling Price (B)	50	40	75
Additional Processing cost per unit [C]	15	16	38
Sales (A*B)	7,50,000	10,00,000	7,50,000
Additional Cost (A*C)	2,25,000	4,00,000	3,75,000
Gross Profit from further processing	5,25,000	6,00,000	3,75,000	15,00,000
Ratio of Gross profit to total profit	0	0	0	1
Joint Cost	52,500	60,000	37,500	1,50,000
Net profit after Joint Cost	4,72,500	5,40,000	3,37,500
Products	A	B	C
Units Sold (A)	12,000	11,000	9,000
Selling Price (B)	50	40	75
Units Produced (D)	15,000	25,000	10,000
Additional Processing cost per unit [C]	15	16	38
Sales (A*B)	6,00,000	4,40,000	6,75,000
Additional Cost (C*D)	2,25,000	4,00,000	3,75,000
Gross Profit from further processing	3,75,000	40,000	3,00,000	7,15,000
Ratio of Gross profit to total profit	1	0	0	1
Joint Cost	78,671	8,392	62,937	1,50,000
Net profit after Joint Cost	2,96,329	31,608	2,37,063