Question

Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are $390,000 for a standard production run that generates 270,000 pints of Smooth Skin and 290,000 pints of Silken Skin. Smooth Skin sells for $2.30 per pint, while Silken Skin sells for $4.50 per pint. (Do not round intermediate calculations. Round 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 $1.20 per pint for Smooth Skin and $1.50 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 $1.20 per pint for Smooth Skin and $1.50 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?

	Allocated joint cost Smooth Silken 1. Relative sales value method 2. Physical measure method 3. Net realizable value method 4. Physical measure method

Answer 1

Allocation Method	Units Produced		Selling price		Beyond processing costs		Net Realisable Value		Units after Further process
	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin
MEASURE	270000	290000	621000	1305000	324000	435000	324000	435000	683100	3915000
Relative Sales Value Method			125747.664	264252.336
Physical Measure Method	188035.714	201964.29
Net Realizable Value Method							166482.213	223517.79
Physical Measure Method									57938.9313	306517.9096

Allocation Method	Units Produced		Selling price		Beyond processing costs		Net Realisable Value		Units after Further process
	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin	Smooth Skin	Silken Skin
MEASURE	270000	290000	=270000*2.3	=290000*4.5	=B3*1.2	=C3*1.5	=B3*1.2	=C3*1.5	=(D3-F3)*2.3	=(E3-G3)*4.5
Relative Sales Value Method			=390000*621000/1926000	=390000*1305000/1926000
Physical Measure Method	=390000*270000/560000	=390000*290000/560000
Net Realizable Value Method							=390000*324000/759000	=390000*435000/759000
Physical Measure Method									=390000*683100/4598100	=360000*3915000/4598100