Question

Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are $330,000 for a standard production run that generates 100,000 pints of Smooth Skin and 180,000 pints of Silken Skin. Smooth Skin sells for $2.80 per pint, while Silken Skin sells for $5.90 per pint. (Round intermediate calculations to 2 decimal places and final answers to nearest whole dollar amounts.)

  
Required:
1. Assuming that both products are sold at the split-off point, how much of the joint cost of each production run is allocated to Smooth Skin using the relative sales value method?
2. If no separable costs are incurred after the split-off point, how much of the joint cost of each production run is allocated to Silken Skin using the physical measure method?
3. If separable processing costs beyond the split-off point are $1.40 per pint for Smooth Skin and $1.00 per pint for Silken Skin, how much of the joint cost of each production run is allocated to Silken Skin using a net realizable value method?
4. If separable processing costs beyond the split-off point are $1.40 per pint for Smooth Skin and $1.00 per pint for Silken Skin, how much of the joint cost of each production run is allocated to Smooth Skin using a physical measure method?

Answer 1

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1. Relative Sale Value:
		A	B	C=A*B	D	E	D*E
		Quanity	Selling Price	Total Sale Value	Weight	Joint Cost	Allocation
Smooth Skin		100000	$               2.8	$              280,000	20.86%	$ 330,000	$       68,852
Silken Skin		180000	$               5.9	$          1,062,000	79.14%	$ 330,000	$     261,148
Total				$          1,342,000			$     330,000
2. Physical Measure Method:
		A	B	C	B*C
		Production	Weight	Joint Cost	Allocation
Smooth Skin		100000	35.71%	$              330,000	$     117,857
Silken Skin		180000	64.29%	$              330,000	$     212,143
Total		280000	100%		$     330,000
3. Net Realizable Value
		A	B	C	D=(B-C)*A	E	F	F*E
		Quanity	Selling Price	Seperable Cost	Total Sale Value	Weight	Joint Cost	Allocation
Smooth Skin		100000	$               2.8	$                       1.4	$     140,000	13.70%	$     330,000	$   45,205
Silken Skin		180000	$               5.9	$                       1.0	$     882,000	86.30%	$     330,000	$ 284,795
Total					$ 1,022,000	100%		$ 330,000
4. Physical Measure Method:
		A	B	C	B*C
		Production	Weight	Joint Cost	Allocation
Smooth Skin		100000	35.71%	$              330,000	$     117,857
Silken Skin		180000	64.29%	$              330,000	$     212,143
Total		280000	100%		$     330,000