Question

The following questions relate to Kyle Company, which manufactures products KA, KB, and KC from a joint process. Joint product costs were $196,000. Additional information follows:

					If Processed Further
Product	Units Produced	Sales Value at Split-Off			Sales Values			Additional Costs
KA	63,000	$	310,000		$	400,000		$	61,000
KB	67,000		280,000			340,000			49,000
KC	31,000		220,000			310,000			37,000

After the publication of recent scientific test results, the government has banned the sale of product KC. IF KC is produced, it must be disposed of in an approved way that costs $194,000 for every 31,000 units produced.

Required:

a. Assuming that Kyle Company continues to use the physical quantities method of allocation, what joint costs will be allocated to KA and to KB, respectively? (Do not round intermediate calculations.)

KA

KB

b. Which, if either, product would you recommend Kyle Company sell at split-off?

	KA
	KB
	None of the above

2.Deming & Sons manufactures four grades of lubricant, W-10, W-20, W-30, and W-40, from a joint process. Additional information follows:

					If Processed Further
Product	Units Produced	Sales Value at Split-Off			Additional Costs			Sales Values
W-10	70,000	$	416,000		$	45,000		$	456,000
W-20	50,000		358,000			35,800			416,000
W-30	40,000		242,000			24,200			300,000
W-40	40,000		184,000			15,000			200,000
	200,000	$	1,200,000		$	120,000		$	1,372,000

Required:

Which, if any, of the four products would you recommend Deming & Sons sell at split-off (and not process further)?

	W-10
	W-20
	W-30
	W-40
	None of the products

Answer 1

Part-1 Allocation of Joint Cost on Physical Measure Method Basis
Product	KA	KB		Total
Units of Production (a)	63000	67000		130000
Percentage (b)	48.46%	51.54%
Allocated Joint Cost (Joint Cost Xb)	$189,000.00	$201,000.00		$390,000.00
Joint Cost = 196000+194000= $390000

2. Both the product should be sold after further processing but if ,, we need to choose one of the product then it's best option to Sell product KB at Split off point .

Solution-2

Prodcut	W-10	W-20	W-30	W-400
Sales Value after Furthr Processing	456000	416000	300000	200000
Less: Additional Cost	45000	35800	24200	15000
Net Sale Value after Additional Cost	411000	380200	275800	185000
Less: Sales Value at Spplit Off	416000	358000	242000	184000
Incremenal Income / (loss)	-5000	22200	33800	1000
Sale at Split Off Point	No	Yes	Yes	Yes

Prodcut W-10 Should be sold at split off point