Question
In: Accounting
Webster Company produces 35,000 units of product A, 30,000 units of product B, and 14,500 units...
Webster Company produces 35,000 units of product A, 30,000 units of product B, and 14,500 units of product C from the same manufacturing process at a cost of $385,000. A and B are joint products, and C is regarded as a by-product. The unit selling prices of the products are $40 for A, $20 for B, and $2 for C. None of the products requires separable processing. Of the units produced, Webster Company sells 28,000 units of A, 29,000 units of B, and 14,500 units of C. The firm uses the net realizable value method to allocate joint costs and by-product costs. Assume no beginning inventory. Required: 1. What is the value of the ending inventory of product A? 2. What is the value of the ending inventory of product B?
Solutions
Expert Solution
|
Particulars |
Amount |
|||||
|
Joint cost |
385000 |
|||||
|
Less: Net realizable value of Product C |
14500*2 |
29000 |
||||
|
Net joint cost to be Allocated to main products |
356000 |
|||||
|
. |
Product A |
Product B |
Total |
|||
|
No. of units produced |
35000 |
30000 |
||||
|
Selling price |
40 |
20 |
||||
|
Sales Value |
1400000 |
600000 |
||||
|
Less: Separable cost |
0 |
0 |
||||
|
Net realizable value |
1400000 |
600000 |
2000000 |
|||
|
Allocation of Joint cost |
1400000 /2000000 *356000 |
249200 |
600000 / 2000000 * 356000 |
106800 |
356000 |
|
|
Per unit Joint cost |
249200 / 35000 |
7.12 |
106800 / 30000 |
3.56 |
||
|
No. of units sold |
28000 |
29000 |
||||
|
Ending inventory |
35000-28000 |
7000 |
30000-29000 |
1000 |
||
|
* Joint cost per units |
7.12 |
3.56 |
||||
|
=Ending inventory value |
49840 |
3560 |
1. Value of the ending inventory of product A = $49840
2. Value of the ending inventory of product B = $3560
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