Question

In: Accounting

Baker Company produces three products: A, B, and C from the same process. Joint costs for...

Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are $2,100.




Pounds


Sales price
per lb. at
split-off

Disposal
cost per
lb. at
split-off


Further
processing
per pound


Final
sales price
per pound
A

  800

$6.50

$3.00

$2.00

$ 7.50
B

1,100

8.25

4.20

3.00

10.00
C

1,500

8.00

4.00

3.50

10.50


If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, $3.00; B, $2.00; and C, $1.00.

a. Using sales value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?

$959

$725

$700

$416

b. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?

$706

$951

$444

$700

Solutions

Expert Solution

Solution:

Part 1 --

Sales Value at split off point method allocates joint costs on the basis of estimated sales value of a given joint product relative to the sales value of total joint production.

Cost allocated to a joint product = Total Joint Costs x Sale Value of the Product / Sales Value of Total Production

Total Sales Value of Products

Products

Pounds

Sales Price at split off

Total Sales Value at split off

A

800

$6.50

$5,200

B

1100

$8.25

$9,075

C

1500

$8

$12,000

$26,275

Joint Cost allocated to Product C = 2,100 x 12,000 / 26,275 = $959

The correct option is $959

Part 2 ---

Products

Pounds

Sales Price at split off per pound

Disposal Cost per lb at split off

Net Realizable Value at split off per pound

Total Net Realizable Value at split off

A

B

C

D = B-C

A*D

A

800

$6.50

$3.00

$3.50

$2,800

B

1100

$8.25

$4.20

$4.05

$4,455

C

1500

$8

$4

$4.00

$6,000

$13,255

Cost allocated to a joint product C = Total Joint Costs 2,100 x Sale Value of the Product 6,000 / Sales Value of Total Production 13,255

= $951

The correct option is $951

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

ekkarill92 answered 1 year ago
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