Question

Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are $360,000 for a standard production run that generates 240,000 pints of Smooth Skin and 110,000 pints of Silken Skin. Smooth Skin sells for $3.10 per pint, while Silken Skin sells for $5.10 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 $1.10 per pint for Smooth Skin and $1.70 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 $1.10 per pint for Smooth Skin and $1.70 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

Answer 1
Using the relative sales value method
	Smooth Skin	Silken Skin	Total
Unit sold	240000	110000
Multiplied by : selling price per unit	$               3.10	$            5.10
Sales value	$        744,000	$     561,000	$ 1,305,000
Joint cost allocated (360000*sales value/1305000)	205,241	154,759	360,000
Joint cost of each production run is allocated to Smooth Skin using the relative sales value method			205,241
Answer 2
Using the physical measure method
	Smooth Skin	Silken Skin	Total
Unit sold	240000	110000	350000
Joint cost allocated (360000*unit sold/350000)	246,857	113,143	360,000
Joint cost of each production run is allocated to Silken Skin using the physical measure method			113,143
Answer 3
Using a net realizable value method
	Smooth Skin	Silken Skin	Total
Sales value	744000	561000	1305000
Less: separate cost (unit sold * separate cost per unit)	264000	187000	451000
Net realizable value	480000	374000	854000
Joint cost allocated (360000*net realizable value/854000)	202,342	157,658	360,000
Joint cost of each production run is allocated to Silken Skin using a net realizable value method			157,658
Answer 4
Using the physical measure method
	Smooth Skin	Silken Skin	Total
Unit sold	240000	110000	350000
Joint cost allocated (360000*unit sold/350000)	246,857	113,143	360,000
Joint cost of each production run is allocated to Smooth Skin using a physical measure method			246,857