Question

Ibrahim Compagny produces three products A, B and C. During the year, the joint costs of processing the three products were $480,000. Production and sales value information were as follows:

Sales Value

Product               Units        at Split-Off        Separable Costs       Selling Price

A                       500,000      $13 per unit         $6.00 per unit        $40 per unit

B                       300,000       $12   per unit       $4.00 per unit        $37 per unit

C                       200,000        $8 per unit         $3.00 per unit        $28 per unit

Allocate the joint costs using the physical output method.

Answer 1

CALCULATION OF THE JOINT PRODUCT COST USING PHYSICAL OUTPUT METHOD
	Unit
Product A	5,00,000
Product B	3,00,000
Product C	2,00,000
Total	10,00,000
Ratio = 5:3:2 is allocated to all product as per output
	Product A	Product B	Product C	Total
Total Cost of $ 480,000 is distributed	$                      2,40,000	$                 1,44,000	$                       96,000	$       4,80,000
	($480,000 X 500,000/1,000,000)	($480,000 X 300,000/1,000,000)	($480,000 X 200,000/1,000,000)