Question

Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are $310,000 for a standard production run that generates 180,000 pints of Smooth Skin and 280,000 pints of Silken Skin. Smooth Skin sells for $3.60 per pint, while Silken Skin sells for $5.10 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 $1.30 per pint for Smooth Skin and $1.80 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 $1.30 per pint for Smooth Skin and $1.80 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?

1. Relative sales value method - Smooth Skin:

2. Physical measure method - Silken Skin:

3. Net realizable value method - Silken Skin:

4. Physical measure method - Smooth Skin:

  

Answer 1

		Allocated Joint cost
		Smooth	Silken
1	Relative sales value method	$     96,763	$    2,13,237
2	Physical measure method	$ 1,21,304	$    1,88,696
3	Net realizable value method	$     95,919	$    2,14,081
4	Physical measure method	$ 1,21,304	$    1,88,696
	Workings:
1	Relative sales value method
		Smooth	Silken	Total
(a)	Production pints	1,80,000	2,80,000	4,60,000
(b)	Selling price per pint	$          3.60	$            5.10
(c) = (a) X (b)	Sales Value	$ 6,48,000	$ 14,28,000	$ 20,76,000
(d) = (c) / $2076000	Sales Value percentage of Total Sales	31.21%	68.79%	100%
(d) X $310000	Allocation of Joint cost	$     96,763	$    2,13,237	$    3,10,000
2	Physical measure method
		Smooth	Silken	Total
(a)	Production pints	1,80,000	2,80,000	4,60,000
(b) = (a) / 460000	Production pints percentage of Total pints produced	39.13%	60.87%	100%
(b) X $310000	Allocation of Joint cost	$ 1,21,304	$    1,88,696	$    3,10,000
3	Net realizable value method
		Smooth	Silken	Total
(a)	Production pints	1,80,000	2,80,000	4,60,000
(b)	Processing cost beyond split off	$          1.30	$            1.80
(c) = (a) X (b)	Total beyond processing cost	$ 2,34,000	$    5,04,000	$    7,38,000
(d)	Sales Value	$ 6,48,000	$ 14,28,000
(e) = (d) - (c)	Net realizable value	$ 4,14,000	$    9,24,000	$ 13,38,000
(f) = (e) / $1338000	Net realizable value percentage of Total Net realizable value	30.94%	69.06%	100%
(f) X $310000	Allocation of Joint cost	$     95,919	$    2,14,081	$    3,10,000
4	Physical measure method
		Smooth	Silken	Total
(a)	Production pints	1,80,000	2,80,000	4,60,000
(b) = (a) / 460000	Production pints percentage of Total pints produced	39.13%	60.87%	100%
(b) X $310000	Allocation of Joint cost	$ 1,21,304	$    1,88,696	$    3,10,000