Question

Fletcher Fabrication, Inc., produces three products by a joint production process. Raw materials are put into production in Department X, and at the end of processing in this department, three products appear. Product A is sold at the split-off point with no further processing. Products B and C require further processing before they are sold. Product B is processed in Department Y, and product C is processed in Department Z. The company uses the estimated net realizable value method of allocating joint production costs. Following is a summary of costs and other data for the quarter ended June 30.

No inventories were on hand at the beginning of the quarter. No raw material was on hand at June 30. All units on hand at the end of the quarter were fully complete as to processing.

Products	A			B			C
Pounds sold		19,000			54,000			74,000
Pounds on hand at June 30		54,000			0			38,000
Sales revenues	$	47,500		$	259,200		$	407,000

Departments	X			Y			Z
Raw material cost	$	163,000		$	0		$	0
Direct labor cost		73,500			92,000			280,500
Manufacturing overhead		27,000			31,500			105,000

Required:

a. Determine the following amounts for each product: (Do not round intermediate calculations.)

(1) Estimated net realizable value used for allocating joint costs.

(2) Joint costs allocated to each of the three products.

(3) Cost of goods sold.

(4) Finished goods inventory costs, June 30.

b. Assume that the entire output of product A could be processed further at an additional cost of $5.90 per pound and then sold for $12.60 per pound. Compute the incremental income from further processing A.

Answer 1

Part-a
1. Computation of Net Realizable Value for allocating Joint Cost
Product	A	B	C
Sales Revenue	$47,500	$259,200	$407,000
Pounds Sold (1)	19000	54000	74000
Net realizable value /Pounds( Sales Revenue/Pounds Sold)	$2.50	$4.80	$5.50
Total Pound in Stock (2)	54000	0	38000
Total production Pounds 3= ( 1+2)	73000	54000	112000
Net Realizable value for all the prodution Pounds ( Total Production Pounds * NRV/Pounds	$182,500	$259,200	$616,000
2. Allocation of Joint Cost each of the three product
Product	A	B	C	Total
Net realizable value /Pounds( Sales Revenue/Pounds Sold)	$182,500.00	$259,200.00	$616,000.00	$1,057,700.00
Alocation of Manufactuing Overhead of Deptt X : $27000
Remark	$182500/1057700*27000	$259200/1057700*27000	$616000/$1057700*27000
Aloocation of Manufacturing OH of Deptt Y: (31500)		$31,500
Aloocation of Manufacturing OH of Deptt Z: (10500)			$105,000
3 Computation of Cost of Goods Sold
Product	A	B	C	Total
Total Prodction Units in Pounds	73000	54000	112000	239000
Aloocation of Raw mtaerial Cost of Deptt X: 163000	$49,786.61	$36,828.45	$76,384.94
Manufacturing Overhead of Deptt x	$4,658.69	$6,616.62	$15,724.69
: DepptY * Deptt Z		$31,500.00	$105,000.00
Direct labour Cost	$73,500.00	$92,000.00	$28,500.00
Total Costof Prodction	$127,945.30	$166,945.07	$225,609.62
Cost of Prodction per Unit ( in Pounds) ( Total cost of Production/Production Unit)	$1.75	$3.09	$2.01
Total Unit Sold	19000	54000	74000
Cost of Goods Sold ( Unit Sold* Cost of Production/ Unit)	$33,300.83	$166,945.07	$149,063.50
4. Computation of Finished Cost inventory as on 30.06
Department	A	B	C
Unit in Stock ( In Pound)	54000	0	407000
Cost of Production/unit	$1.75	$3.09	$2.01
Vale of Inventory	$94,644.47	$0.00	$819,849.25
Part-b
Computation of Income from Product B & C
Product	B	C	Total
Sales Revenue	$259,200	$407,000	$666,200
Pounds Sold (1)	54000	74000
NRV / unit( Sales Revenue/Pounds Sold)	$4.80	$5.50
Unit Produced	54000	112000
Total NRV for Prodction unit	$259,200.00	$616,000.00	$875,200.00
Cost of good sold for Prodction Unit	166945.0729	225609.6229	392554.6957
Net Income	$92,254.93	$390,390.38	$482,645.30
Computation of Income by Production of Fully product A
Product	A
Total Prodction Units in Pounds	163000
Raw material Cost	$163,000.00
Manufacturing Overhead of Deptt x	$27,000.00
Further Processing Cost : $5.90/Pound	$961,700.00
Total Cost of Prodction	$1,151,700.00
Sale Value ( $12.60/Pound)	$2,053,800
Net Income	$902,100.00
Incrementat Income
Net Income By Producing Product A	$902,100.00
Net Income by producing Product B&C	$482,645.30
Incremental Income	$419,454.70