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 170,000 pints of Smooth Skin and 300,000 pints of Silken Skin. Smooth Skin sells for $3.20 per pint, while Silken Skin sells for $5.20 per pint. (Do not round intermediate calculations. Round final answers to nearest whole dollar amounts.)

  
Required:
3. If separable processing costs beyond the split-off point are $1.80 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?

  

Answer is complete but not entirely correct.

	1. Relative sales value method - Smooth Skin $93,080selected answer correct 2. Physical measure method - Silken Skin $229,787selected answer correct 3. Net realizable value method - Silken Skin 4. Physical measure method - Smooth Skin $130,213 correct

Answer 1

Answer:
	Smooth Skin	Silken Skin
Number of Units of pints (A)	170,000	300,000
Selling price per Unit (B)	$ 3.20	$ 5.20
Sales Value (A x B )	$ 544,000	$ 1,560,000
Net Realizable Value    = Selling Price (-) Processing Costs ) x No. of Pints	$ 238,000 (($ 3.20 (-) $ 1.80 ) x 170,000)	$ 1,050,000 (($ 5.20 (-) $ 1.70 ) x 300,000)
Joint costs Alloaction
Joints Costs = $ 360,000
Total Sales Value = $ 544,000 + $ 1,560,000                                      = $ 2,104,000
Total Net Realizable Value          = $ 238,000 + $ 1,05,0000          =   $ 1,288,000
Total no. of Units = 170,000 + 300,000 = 470,000	Smooth Skin	Silken Skin
Relative Sales Value Method	$ 93,080 ( $ 360,000 x $ 544,000 / $ 2,104,000 )	$ 266,920 ( $ 360,000 x $ 1,560,000/ $ 2,104,000 )
Physical Measure Method	$ 130,213 ( $ 360,000 x $ 170,000 / $ 470,000 )	$ 229,787 ( $ 360,000 x $ 300,000 / $ 470,000 )
Net Realizable Value Method	$ 66,522 ( $ 360,000 x $ 238,000 / $ 1,288,000 )	$ 293,478 ( $ 360,000 x $ 1,050,000 / $ 1,288,000 )
1) Relative sales value method - Smooth Skin	$ 93,080
2) Physical measure method - Silken Skin	$ 229,787
3) Net realizable value method - Silken Skin	$ 293,478
4) Physical measure method - Smooth Skin	$ 130,213