Joint and by-products, estimated net realisable value method. (CPA, adapted) (G0 minutes) Protomastoras, SA, produces three products—

Alpha, Beta and Gamma. Alpha and Gamma are joint products and Beta is a by-product of Alpha. No joint costs are to be allocated to the byproduct. The production processes for a given year are as follows:

a. In Department 1,110,000 kg of direct material, Rho, are processed at a total cost of EUR 120,000. After processing in Department 1,60% of the units are transferred to Department 2 and 40% of the units now Gamma) are transferred to Department 3.

b. In Department 2, the material is further processed at a total additional cost of EUR 38,000. Seventy percent of the units (now Alpha) are transferred to Department 4 and 30% emerge as Beta, the by-product, to be sold at EUR 1.20 per kg. Separable marketing costs for Beta are EUR 8,100.

c. In Department 4, Alpha is processed at a total additional cost of EUR 23,660. After this processing, Alpha is ready for sale at EUR 5 per kg.

d. In Department 3,Gamma is processed at a total additional cost of EUR 165,000. In this department, a normal loss of units of Gamma occurs, which equals 10% of the good output of Gamma. The remaining good output of Gamma is then sold for EUR 12 per kg. iyy5 REQUIRED 1. Prepare a schedule showing the allocation of the EUR 120,000 joint costs between Alpha and Gamma using the estimated NRV method. The estimated NRV of Beta should be treated as an addition to the sales value of Alpha.

2. Independent of your answer to requirement 1,assume that EUR 102,000 of total joint costs were appropriately allocated to Alpha. Assume also that there were 48,000 kg of Alpha and 20,000 kg of Beta available to sell. Prepare an income statement through gross margin for Alpha using the following facts:

a. During the year, sales of Alpha were 80% of the kilograms available for sale. There was no beginning stock.

b. The estimated NRV of Beta available for sale is to be deducted from the cost of producing Alpha. The ending stock of Alpha is to be based on the net costs of production.

c. All other cost and selling price data are listed in a-d.