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PZU S.A. uses a joint process to produce products YYYY1, ZZZZ1, AAAA2, and BBBB2. Each product may be sold at its split-off point or processed
PZU S.A. uses a joint process to produce products YYYY1, ZZZZ1, AAAA2, and BBBB2. Each product may be sold at its split-off point or processed further. Joint processing costs for a single batch of joint products are $360,000. Other relevant data are as follows:
Product | Sales Value At Split-Off | Additional Costs of Processing | Sales Value of Final Product |
---|---|---|---|
YYYY1 | $50,000 | $54,000 | $100,000 |
ZZZZ1 | 64,000 | 48,000 | 92,000 |
AAAA2 | 56,000 | 51,000 | 94,000 |
BBBB2 | 44,000 | 42,000 | 70,000 |
Requirements:
- Evaluate the profitability of processing Product YYYY1 further beyond the split-off point.
- Determine the net benefit of processing Product ZZZZ1 beyond the split-off point.
- Allocate joint costs using the constant gross margin percentage method.
- Prepare a cost reconciliation report for PZU S.A.
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