Question

Euclid Corporation processes a patented chemical, P-1, and produces two outputs, P-11 and P-12. In August, the costs to process P-1 are $165,000 for materials and $280,000 for conversion costs. P-11 has a sales value of $688,000 and P-12 has a sales value of $172,000. Required Using the net realizable value method, assign costs to P-11 and P-12 for August. (Do not round intermediate calculations.)

Answer 1

	CALCULATION OF COST OF THE PRODUCT P-11 & P-12 UNDER NET REALIZABLE METHOD
		P-11	P-12	Total
	Sales	$                    6,88,000	$                 1,72,000	$    8,60,000
	Ratio	0.80	0.20
	Ratio Or	4/5	1/5
	Cost of Material (A)	$                    1,32,000	$                     33,000	$    1,65,000
		($ 165,000 X 80%)	($ 165,000 X 20%)
	Conversion Cost (B)	$                    2,24,000	$                     56,000	$    2,80,000
		($ 280,000 X 80%)	($ 280,000 X 20%)
	Total Cost of P11 & P12 (A+B)	$                    3,56,000	$                     89,000	$    4,45,000
	Answer =
	Cost of P-11	$                    3,56,000
	Cost of P-12	$                        89,000