Question

he Marshall Company has a joint production process that produces two joint products and a by-product. The joint products are Ying and Yang, and the by-product is Bit. Marshall accounts for the costs of its products using the net realizable value method. The two joint products are processed beyond the split-off point, incurring separable processing costs. There is a $1,300 disposal cost for the by-product. A summary of a recent month’s activity at Marshall is shown below: Ying Yang Bit Units sold 65,000 52,000 13,000 Units produced 65,000 52,000 13,000 Separable processing costs—variable $ 182,000 $ 55,000 $ — Separable processing costs—fixed $ 13,000 $ 10,000 $ — Sales price $ 6.00 $ 12.50 $ 1.50 Total joint costs for Marshall in the recent month are $188,200, of which $80,926 is a variable cost. Required: 1. Calculate the manufacturing cost per unit for each of the three products. (Round manufacturing cost per unit answers to 2 decimal places.) 2. Calculate the total gross margin for each product.

Answer 1

1)	Manufacturing cost per unit for each of three products
		Joint Products		By product
		Ying	Yang	Bit
	Units produced & sold ( as given ) A	65,000	52,000	13,000
	Separable processing costs - variable ( as given ) G	1,82,000	55,000	-
	Separable processing costs - fixed ( as given ) H	13,000	10,000	-
	Disposal cost of the by product ( as given )	-	-	1,300
	Final Sales Value per unit ( as given ) B	6.00	12.50	1.50
	Final Sales Value ( A * B)	3,90,000	6,50,000	19,500
	Sales Value (-) Separable processing costs ( Refer Note a)	1,95,000	5,85,000	-
	Joint cost allocation for the month ( Refer Note b) I	47,050	1,41,150	-
	Total cost of manufacturing (G+H+I) J	2,42,050	2,06,150	-
	Cost of manufacturing per unit (J/A)	3.72	3.96	-
	Notes
a	As mentioned in the question, Marshall accounts for the cost of its products using the net realizable value method. In cost accounting, when separable costs are incurred after you pass the splitoff point, the net realizable value (NRV) method allocates joint costs on the basis of the final sales value less separable costs. Final sales value is simply the price tag — the price paid by the customer. Therefore :
		Ying	Yang
	Final Sales Value ( A * B) C	3,90,000	6,50,000
	Separable processing costs - variable ( as given ) D	1,82,000	55,000
	Separable processing costs - fixed ( as given ) E	13,000	10,000
	C- (D+E) F	1,95,000	5,85,000
b	Joint cost allocation for the month
	Total joint cost for the month	1,88,200
	Variable joint cost	80,926
	Fixed joint cost	1,07,274
	Ying (188,200*195,000/(195,000+585,000))	47,050
	Yang (188,200*585,000/(195,000+585,000))	1,41,150
2)	Total Gross Margin for each product
		Joint Products		By product
		Ying	Yang	Bit
	Final Sales Value (from above)	3,90,000	6,50,000	19,500
	Total cost of manufacturing (from J above)	2,42,050	2,06,150	-
	Gross Margin ( Sales Value - Cost of manufacturing)	1,47,950	4,43,850	19,500