Chapter 9 Problem 1 Joint Cost Allocation

Recyclers, Inc. reprocesses paper and obtains 2 main products and a by-product. By-product revenues are treated as a reduction in joint costs. During the period, 1,000 tons were processed at a cost of $12,000 for materials and processing, resulting in the following:

Sales Value Separable Sales Value After

Product Tons at Split-Off Costs Further Processing

Main-1 200 $4,000 $2,000 $10,000

Main-2 400 5,000 6,000 12,000

By-product 300 2,000 -0- 2,000

a. If the firm allocates joint costs to the main products using the physical output method, how much will be allocated to Main-1?

b. If the firm allocates joint costs to the main products using the sales value at split-off point method, how much will be allocated to Main-2?

c. If the firm allocates joint costs to the main products using the net realizable value, how much will be allocated to Main-1?