Question

Computing Joint Costs—Sales Value at Split-Off and Net Realizable Value Methods LeMoyne Manufacturing Inc.’s joint cost of producing 2,000 units of Product X, 1,000 units of Product Y, and 1,000 units of Product Z is $50,000. The unit sales values of the three products at the split-off point are Product X–$30, Product Y–$100, and Product Z–$90. Ending inventories include 200 units of Product X, 300 units of Product Y, and 100 units of Product Z. In your interim calculations, round sales value percentages to two decimal places and allocated joint cost to three decimal places. a. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their sales values at split-off. $ 9000 b. Assume that Product Z can be sold for $120 a unit if it is processed after split-off at a cost of $10 a unit. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their net realizable values. (I need help with part B)

Answer 1

PART A –

JOINT COST on the basis of their sales values at split-off

FORMULA	A = GIVEN	B = GIVEN	C = AxB	D = C / 250000	E = 50000 x D	F = E / A	G = GIVEN	H = G x F
PRODUCT	UNITS	UNIT SALE PRICE AT SPLIT OFF	SALE VALUE AT SPLIT OFF	SALE VALUE %	JOINT COST IN SALE VALUE RATIO	JOINT COST PER UNIT	CLOSING STOCK UNITS	JOINT COST IN ENDING INVENTORY
X	2000	30	60000	24.00 %	12000	6	200	1200
Y	1000	100	100000	40.00 %	20000	20	300	6000
Z	1000	90	90000	36.00 %	18000	18	100	1800
TOTAL	4000		250000		50000			9000

Joint Cost to be Included in Closing Stock = $ 9000

PART B –

JOINT COST on the basis of their net realizable values

Computation of net realizable value

Product X = $ 30 ( as there is no further processing)

Product y = $ 100 ( as there is no further processing)

Product z = $ 120 - $ 10 = $ 110 per unit

( sale value – further processing cost)

Allocation of Joint Cost

FORMULA	A = GIVEN	B	C = AxB	D = C / 250000	E = 50000 x D	F = E / A	G = GIVEN	H = G x F
PRODUCT	UNITS	NET REL. PRICE	SALE VALUE AT SPLIT OFF	SALE VALUE %	JOINT COST IN SALE VALUE RATIO	JOINT COST PER UNIT	CLOSING STOCK UNITS	JOINT COST IN ENDING INVENTORY
X	2000	30	60000	22.22 %	11110	05.555	200	1111
Y	1000	100	100000	37.04 %	18520	18.520	300	5556
Z	1000	110	110000	40.74 %	20370	20.370	100	2037
TOTAL	4000		270000		50000			8704

Joint Cost to be Included in Closing Stock = $ 8704