Question

Atkinson, Inc., manufactures products A, B, and C from a common process. Joint costs were $60,000. Additional information is as follows:

			If Processed Further
Product	Units Produced		Sales Value at Split-Off				Sales Value				Additional Costs
A	6,000		$	40,000			$	55,000			$	4,000
B	4,000			35,000				45,000				6,000
C	2,000			25,000
	12,000		$	100,000			$	100,000			$	10,000

Required: (show your work on a separate document and submit in the drop box provided in Blackboard) 10 Points

• Assuming that joint product costs are allocated using the Estimated Net Realizable Value Method, what were the costs allocated to each Product?

     a. Product A____________________ b. Product B______________________ c. Product C_______________________________   

• Assume C is a by-product and Atkinson uses the cost reduction method of accounting for by-product cost. If joint costs are allocated based on Estimated Net Realizable value method, how much of the joint costs would be allocated to each product?

      d. Product A___________________ e. Product B______________________

Answer 1

Answer to part (a):

   Atkinson, Inc.

Statement of Allocation  of joint cost Using Net Realizable Value

Joint Product	Net Realizable Value	Working	Share In Joint Cost
A	($55000-$4000) = $51,000	($51000/$115000) x $60,000	$26,608.70
B	($45000-$6000) = $39,000	($39000/$115000) x $60,000	$20,347.83
C	$25,000 = $25,000	($25000/$115000) $60,000	$13,043.47
Total	$1.15,000		$60,000

Answer to part (b):

If Product C is By-Product in such a scenario we will reduce the selling price of Product C at the split-off point from the joint cost.

Accordingly, Joint Cost= $60,000-$25,000=$45,000

Atkinson, Inc.

Statement of Allocation  of joint cost Using Net Realizable Value

Joint Product	Net Realizable Value	Working	Share In Joint Cost
A	($55000-$4000) = $51,000	($51000/$90000) x $45000	$25,500
B	($45000-$6000) = $39,000	($39000/$90000) x $45000	$19,500
Total	$90,000		$45,000