Becker Products Company produces three products from a joint source. A single raw material is introduced into
Question:
Production costs for February are as follows:
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The number of units (kg) of product produced and sold in February is as follows:
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The average price per unit sold in February for each of the products is as follows:
Product A ....................$ 15 per kg
Butine .......................130
Cantol ......................120
There were no inventories of intermediate products B and C at the beginning or end of February and there was no waste or spoilage in any of the processes. The by-product is not accounted for separately; instead, revenue from sales of the by-product is treated as a deduction from joint cost.
Required:
(1) Calculate the cost of the finished goods inventories if the average unit cost method of joint cost allocation is used.
(2) Calculate the value of cost of goods sold if the market value method of joint cost allocation is used. Round allocated joint cost to nearest one thousand dollars.
(3) The company controller argues that the market value method of allocation is the most accurate way to allocate joint cost. The president replies that the average unit cost method is simpler and easier to understand, especially if he has to make a decision about whether to drop a product or continue to process it. The controller claims that using the market value method to analyze a drop or continue decision would be better. Respond to both the president's and controller's comments, and briefly explain the reasons for allocating joint cost.
Step by Step Answer:
1 Average unit cost method Joint cost of 590000 less 60000 byproduct credit 15 4 000 kg 530000 53000...View the full answer
