Black Corporation processes xyrex into three outputs: Xy-1, Xy-2, and Xy-3. Xy-1 accounts for 60 percent of
Question:
Black Corporation processes xyrex into three outputs: Xy-1, Xy-2, and Xy-3. Xy-1 accounts for 60 percent of the net realizable value at the split-off point, Xy-2 accounts for 30 percent, and Xy-3 accounts for the balance. The joint costs total $365,500. If Xy-3 is accounted for as a by-product, its $37,600 net realizable value at split-off is credited to the joint manufacturing costs using method 1 described in the text, which credits the by-product’s net realizable value as a reduction in the joint costs.
Required
a. What are the allocated joint costs for the three outputs
(1) If Xy-3 is accounted for as a joint product?
(2) If Xy-3 is accounted for as a by-product?
b. Management does not understand why joint costs are allocated to Xy-3 differently when it is accounted for as a by-product. Write a brief memo explaining why this occurs.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher